Reinsurance Rates on Line Likely Flat to Lower, Slight Excess of Capacity at Mid-Year Renewals: Aon Re Global Analysis
30 March 2007 - 10:00PM
PR Newswire (US)
CHICAGO, March 30 /PRNewswire-FirstCall/ -- Reinsurance rates on
line for personal lines, standard commercial lines and complex
commercial lines are likely to be flat to lower during mid-year
renewals of property catastrophe reinsurance programs, according to
an Aon Re Global analysis. Additionally, Aon Re expects a slight
excess of capacity relative to likely reduced demand for peak
Florida capacity. (Logo:
http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO ) Aon Re
Global's market expectations, detailed by region, for the June 1
and July 1 renewals: ROL Capacity Retention Changes Changes Changes
United States: Personal lines Flat to -20% +10 to +25% Voluntary
Standard commercial lines Flat to -15% +5 to +20% Voluntary Complex
commercial lines Flat to -10% Flat to +20% Voluntary Europe Flat to
-5% Plentiful Voluntary United Kingdom Flat Plentiful Voluntary
Japan Flat to -5% Plentiful Voluntary Asia Pacific (Ex. Japan) -10%
to -15% Plentiful Voluntary Australia -5% to -10% Plentiful
Voluntary Canada Flat to -10% Plentiful Voluntary South America -5%
to -20% Plentiful Voluntary Mexico -10% to -20% Plentiful Voluntary
Caribbean -5% to -10% +5 to +20% Voluntary Assumes no changes to
exposures reinsured. Rate of change measured from June and July 1,
2006 terms The drivers at play in the property catastrophe
reinsurance market leading up to the June 1 and July 1 renewals
include: * A nearly loss free reinsurance year in 2006 *
Restoration of reinsurers' capital bases * Significant
participation in the catastrophe reinsurance business from
non-traditional sources, such as hedge funds, high net worth
individuals, institutional money managers and the asset backed
securities market * $10-$14 billion of reinsurer capital freed up
as a result of additional reimbursement contract capacity provided
through the Florida Hurricane Catastrophe Fund, a state-controlled
agency that acts as a reinsurer of Florida residential risks *
$8-$12 billion of reinsurer capital freed up or expected to be
freed up from the actual and expected growth of a newly competitive
Citizens Property Insurance Corporation, a state-controlled agency
that acts as an insurer of Florida residential and commercial risks
* Substantial easing of a major rating agency's capital
requirements for insurers related to required capital for property
catastrophe risks * Improving confidence from reinsurers in the
revised catastrophe reinsurance models Several factors are working
contrary to these dynamics, including: * Increasing pressure for
property catastrophe reinsurers to return capital to shareholders
as market conditions soften * The potential for reinsurance
industry consolidation and related capital management measures that
may reduce capital and capacity * Expectations that non-traditional
investors such as hedge funds will be disciplined as expected
returns on collateralized products decrease as market conditions
soften "Four months ahead of the Jan. 1, 2007 renewals, Aon Re
Global correctly predicted the return of a functioning worldwide
property catastrophe reinsurance marketplace," said Bryon Ehrhart,
president and chief executive officer of Aon Re Services. "In such
a marketplace, cedents would generally find sufficient capacity at
terms and conditions that represented accretive underwriting
capital for their organizations. We believe Aon Re Global's ability
to provide expectations in advance of key renewal dates provides
significant value to our clients." About Aon Re Global Aon Re
Global, the world's leading reinsurance intermediary, provides
clients with a full range of services in the design, structure and
implementation of risk-transfer programs through a network of
offices in more than 40 countries. In addition to traditional
treaty and facultative placement services, Aon Re Global offers
clients a range of advisory and consulting services -- such as
catastrophe information forecasting and financial analysis. Aon Re
Global, a subsidiary of Aon Corporation, was named best reinsurance
broker in 2006 by readers of Business Insurance and Reinsurance and
in 2007 by readers of US Insurer. About Aon Aon Corporation
(http://www.aon.com/) is a leading provider of risk management
services, insurance and reinsurance brokerage, human capital and
management consulting, and specialty insurance underwriting. There
are 43,000 employees working in Aon's 500 offices in more than 120
countries. Backed by broad resources, industry knowledge and
technical expertise, Aon professionals help a wide range of clients
develop effective risk management and workforce productivity
solutions. This press release contains certain statements related
to future results, or states our intentions, beliefs and
expectations or predictions for the future which are
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from either
historical or anticipated results depending on a variety of
factors. Potential factors that could impact results include:
general economic conditions in different countries in which we do
business around the world, changes in global equity and fixed
income markets that could affect the return on invested assets,
fluctuations in exchange and interest rates that could influence
revenue and expense, rating agency actions that could affect our
ability to borrow funds, funding of our various pension plans,
changes in the competitive environment, our ability to implement
restructuring initiatives and other initiatives intended to yield
cost savings, our ability to execute the stock repurchase program,
our ability to obtain regulatory or legislative changes to permit
continuous sales of our supplemental Medicare health product,
changes in commercial property and casualty markets and commercial
premium rates that could impact revenues, changes in revenues and
earnings due to the elimination of contingent commissions, other
uncertainties surrounding a new compensation model, the impact of
investigations brought by state attorneys general, state insurance
regulators, federal prosecutors, and federal regulators, the impact
of class actions and individual lawsuits including client class
actions, securities class actions, derivative actions, ERISA class
actions, the impact of the analysis of practices relating to stock
options, the cost of resolution of other contingent liabilities and
loss contingencies, and the difference in ultimate paid claims in
our underwriting companies from actuarial estimates. Further
information concerning the Company and its business, including
factors that potentially could materially affect the Company's
financial results, is contained in the Company's filings with the
Securities and Exchange Commission. Media Contacts Chicago: London:
Rahsaan Johnson Reuben Aitchison 312.381.2684 +44 (0)20 7086 7201
http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO
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Chicago: Rahsaan Johnson, +1-312-381-2684, , or London: Reuben
Aitchison, +011-44-0-20-7086-7201, , both of Aon Corporation Web
site: http://www.aon.com/
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