The results for the first 9 months of 2011 are in and they don’t look good for anyone. Insurance costs are up. Insurer profits are down, and capital has moved out of the reinsurance market.
Aon Benfield reports that on average, casualty rate levels continue to be positive in Q3 2011 . Rate increases are more broadly based than in prior quarters with Workers’ Comp and Property leading the way. In Q3, D&O rates continue to be the outlier as rate decreases seem to persist in that line.
Insurers aren’t seeing the benefits of rising rates, National Underwriter reports that for the first 9 months of 2011, the industry P&C combined ratio has risen to 105.3. And that’s after the effect of favorable reserve development.
On the other side of the insurance spectrum, they estimate that global reinsurer capital declined 4% from $470 billion at December 31, 2010 to $450 billion at September 30, 2011, the reduction of 6% in the first quarter being offset by growth of 1% in both the second and third quarters. This calculation is a broad measure of capital available for reinsurance and includes both traditional and non-traditional forms of reinsurance capital. The cause for the exit of reinsurance capital may be the paltry return on equity 2.8% for the first 9 months of 2011 compared to a 10.4% return for 2010.
All the data points in the same direction – rising rates across the board. Maybe we are finally heading towards a hard market. Stay tuned.