Reinsurance getting harder to find
While primary P&C insurance markets appear to be flat to softening, the opposite seems to be occuring in the reinsurance business. According to leaders of several of the top reinsurers, capacity is down while demand is up, the indication of a hardening reinsurance market.
Underlying these macro trends are less obvious factors contributing to this apparent dichotomy. First, the secondary insurers are paying more attention to bottom lines than top lines; looking for profitable business and not just any business. Second, reinsurers are seeking good long-tail line business such as workers comp; these lines also tend to be the least affected by natural catastrophes and provide the longest access to capital as claims are paid out over years instead of months. Third, with interest rates ticking up, reinsurers can find attractive places to invest premiums over the long haul.
And finally, there are a lot of very anxious reinsurance underwriters who break out in a cold sweat when the barometer drops...witness all the press about the season's first tropical depression, a weather non-event that normally would merit nothing more than a slightly extended local weather update in coastal Florida cities.