Willis offer an assessment of how the reinsurance industry is surviving the credit crunch. Key points:

1. Reinsurers’ balance sheets have stood up pretty well, especially compared to the parlous situation in the capital markets.
2. Access to capital is going to remain tight, so reinsurers are being cautious about risk exposure.
3. So prices are going up, especially in capital intensive lines (like US cat)
4. Primary carriers are looking for more reinsurance, so as to reduce their risk.
5. But those same carriers are still not charging enough on their own inwards business.
6. The lack of trust in credit rating agencies means that carriers appear to be spreading reinsurance purchasing wider, and syndicating more, rather than lobbing everything into 2 or 3 carriers alone. This means more opportunity for the smaller RI carriers (and more work for brokers).

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Citi analyst Joshua Shanker said reinsurers might get rate increases of as much as 10 percent for 1/1 renewals.

Shankar cited the following factors:

* investment losses,
* large storms,
* accumulated casualty loss trends and
* financial difficulties faced by several of the industry’s largest commercial insurers and reinsurers

as explaining the position, to which I would also add the almost complete drop-off in alternate risk transfer products following the financial rout of recent months.

Perhaps this sort of reporting will do something to stabilise the mad swings we’ve been seeing of late in the share prices of even well-run carriers.

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