Asian reinsurance rates starting to spike

Now the region is beginning to feel the rate-raising impact of last year's deluge of natural disasters.

Two-thirds of so-called heavy catastrophe losses in 2011 occurred in Asia, the most of prominent of which were the Japanese tsunami and the Thailand floods, and all these have had a spiking effect on renewal reinsurance being introduced this April.

"A significant renewal date for the Asia Pacific region, April 1 provided the first real indication of how the heavy catastrophe losses of 2011 – two-thirds of which occurred in Asia – have affected reinsurance rates in Japan and the rest of the region," said risk and reinsurance intermediary Guy Carpenter in a release.

Japan reinsurers in particular seem keen on moving prices up a hefty notch.

"Careful planning by Japanese insurers and their brokers ensured that capacity was secured albeit at increased prices for excess of loss covers and with tightened terms and conditions in many lines. Rates were up in all property catastrophe and per risk lines. Casualty lines indicated mixed results, but the general trend was for modest increases. Reinsurer capacity was available but tight. Following the trend of recent years, there was limited or no signing down in most programs, and placements were not completed until the last reinsurers replied," it said.

Meanwhile, in Australia and New Zealand, the rate sentiment is also leaning upwads.

"Reinsurers indicated their interest in moving pricing levels upwards, consistent with their approach to the January 1 renewals. Loss-impacted programs experienced double-digit rate increases, as cedents sought to maintain expiring deductible levels and horizontal coverage ahead of the Australian Prudential Regulation Authority’s planned introduction of revised capital requirements in 2013-2014. Reinsurers also sought to limit contingent business interruption coverage for programs renewing at April 1, mostly in response to the floods in Thailand," it said.

Korea reinsurance rates are also seeing big increases across the board.

"Reinsurance rates for property catastrophe excess of loss treaties were generally up 5 percent to 25 percent year over year on a risk-adjusted basis. Even though Korean catastrophe treaties were generally clean over the past 12 months, rates increased because of a general market hardening following a large number of insured losses across Asia, as well as due to heightened scrutiny of interests abroad. Loss-free property per risk treaty reinsurance rates in Korea were largely stable year over year. Pricing did increase by approximately 20 percent to 30 percent, however, for programs experiencing significant losses in 2011," it said.