An insightful article from Artemis, efficiently summarising Munich Re's research.
Much of the pressure felt in the reinsurance industry has arisen as a result of alternative capital flooding the market, but it should be pointed out that a significant proportion of this capital focuses on natural disasters such as hurricanes, earthquakes, floods, etc. With several years of relatively benign loss activity, pressure on pricing continues, and Reinsurers feel the pinch more and more at each renewal.
(Re)Insurers will ever continue to narrow the gap between economic losses and insured losses in an effort to provide more adequate protection to society, and to make best use of their expertise.
However, we are increasingly seeing a move towards alternative sources of income for Reinsurers, with the likes of Swiss Re looking to maximise the penetration of their specialist reinsurance products. One could argue that (notwithstanding the benefits to society of a benign catastrophe year), the reinsurance industry is benefiting by having to become more creative.
Losses from natural catastrophes in 2015 resulted in just $27 billion of impact to the insurance and reinsurance industry, according to Munich Re, lower than the figure seen in 2014 and the lowest since 2009. ... Of course lower losses is good for society, meaning a lower impact to lives and livelihood from natural disasters and severe weather events. But for the reinsurance industry which is battling with continued rate softening, as seen at the latest January reinsurance renewals, the lack of catastrophes has exacerbated the rate decline and helped to ramp up competition due to high levels of excess capital in the industry.