[FRANKFURT] Reinsurance prices slid at the start of the year for contracts starting on Jan 1, as supply outstripped demand following a reduction in natural catastrophe damage claims, broker Willis Re said on Friday.
Reinsurers, who renew annual contracts with their mainly European insurance company clients at the start of the year, expect no respite from falling prices in nearly all business lines and geographies, Willis said.
"The continued lack of demand and oversupply of capital can only keep driving pricing down," Willis Re Chief Executive John Cavanagh said in a statement.
Big reinsurers such as Munich Re, Swiss Re and Hannover Re are due to release the results of their January contract negotiations in the coming weeks.
Swiss Re said last month that industry-wide insured losses fell to 34 billion euros (US$41 billion) last year, down nearly a quarter from 45 billion euros in 2013, and were well below the 10-year average of 64 billion.
Munich Re is due to release its industry loss estimate for 2014 on Jan. 7.
Willis said Europe-wide property reinsurance prices for business not affected by catastrophes were down by 10-15 percent, for example.
While some reinsurance buyers were willing to pay above-market prices to maintain relationships with key partners, and some reinsurers were unwilling to cut prices, small and single-business line reinsurers were facing particularly tough competition, Willis said.
Some reinsurers are seeking to diversify their business and merge with peers as a way out of the predicament, it added.
"Adding to reinsurer woes are the predictions that the global reinsurance market is only just managing to cover its cost of capital in 2014 and may fail to do so in 2015," Mr Cavanagh said.
Reinsurers, whose business model is to help insurers pay big damage claims in exchange for part of the premium, are facing increasing competition from specialised funds offering reinsurance backed by pension and hedge funds.