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Reinsurance Market Will Continue to Soften for June and July Renewals: Aon Re Global Analysis
"Supply continues to grow at a faster rate than that of cedent demand, which implies continued softening," said
Aon Re Global's market expectations for the June 1 and July 1 renewals, detailed by region: Region Rate On Line Capacity Retention Changes Changes Changes Americas U.S. national personal lines -10 to -15% +10 to +15% +5 to +10% U.S. regional personal lines -15 to -25% +15 to +20% +5 % U.S. standard commercial lines -10 to -15% +10 to +15% Stable U.S. complex commercial lines -10 to -15% +10 to +15% Stable to -10% Canada -7.5 to -12.5% +10 to +15% Stable Caribbean -5 to -10% +10 to +15% Stable Mexico -5 to -10% +10 to +15% Stable South America -5 to -10% +10 to +15% Stable Europe Northern Europe (wind dominating) Flat to -10% +10 to +15% Stable Southern Europe (quake dominating) -5 to -15% +10 to +15% Stable UK Flat to -10% +10 to +15% Stable Asia Asia Pacific (excluding Japan) Flat to -10% +20 to +25% Stable Japan Flat to -10% -5 to -10% Stable Australia Flat +10 to +15% Stable Assumes no changes in insured catastrophe exposures. Rate of change measured from June 1 and July 1, 2007 terms.
Expectations for property and casualty reinsurers leading up to the
— Low severity of property catastrophe losses in 2006, 2007 and the first quarter of 2008 — 15 to 20 percent returns on equity in 2007 — Significant reserve releases in 2007 and further reserve releases anticipated in 2008 — Growing capital bases, due in part to lighter share repurchases than anticipated — Stability or anticipated decreases in key U.S. perils of property catastrophe loss models — Limited impact on most reinsurers from mortgage security losses and the repricing of credit risk — Increased interest in assuming property catastrophe and other insurance risks from capital markets investors through insurance- linked securities, industry loss warranty swaps or collateralized reinsurance transactions at prices comparable to projected decreases in traditional reinsurance costs
At current pricing levels, and with the capitalization of the property and casualty reinsurance market, Aon Re Global estimates that it would require a ground-up property catastrophe occurrence loss in the range of
A substantial majority of the world's largest property insurers now utilize risk transfer capacity through sponsorship of catastrophe bond transactions. This alternative facility now represents between 10 and 30 percent of program capacity for insurers buying more than
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About Aon Corporation
Aon Re Global, the world's leading and most preferred reinsurance intermediary, provides clients with integrated capital solutions and services through a world-class network of experts in more than 35 countries. Clients are better able to differentiate and meet their business objectives with Aon Re Global's best-in-class treaty and facultative reinsurance placement services, capital markets expertise, and relevant analytics and technical expertise, including catastrophe management, actuarial, and rating agency counsel. Aon Re Global was named best reinsurance broker in 2007 and 2006 by readers of Business Insurance, in 2007 by readers of US Insurer and in 2006 by readers of Reinsurance.
Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting. Through its 36,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was named the world's "best broker" by Euromoney magazine's 2008 Insurance Survey. Aon also was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com
Media Contacts Rahsaan Johnson James White 312.381.2684 44 (0)20.7086.0067 Rahsaan_Johnson@aon.com James.White@aon.co.uk
SOURCE Aon Corporation
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