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Demand for reinsurance keeps industry strong

Reinsurers are continuing to outperform the rest of the financial services sector, according to a report by global reinsurance broker Willis Re.

It says that despite poor investment returns in 2008, most reinsurers posted positive results and some returned an underwriting profit.

The four-monthly market report says the reinsurance market stands out as the only capital market operating smoothly.

Willis Re CEO Peter Hearn says there is no doubt reinsurers are being squeezed by investment performance, catastrophe losses and a growing need to increase prior year casualty reserves, as well as the volatility in currency exchange rates.

“However, despite these challenges, the increased demand for reinsurance which started at January 1 renewals, continues strongly to April 1 renewals and shows no signs of diminishing,” he said.

The report also notes that access to fresh capital remains limited mainly to Lloyd’s, which has outperformed the catastrophe bond market in previous months.

The report says the bond market stalled following the collapse of Lehman Brothers, but has adjusted its product and reopened. Buyers are seeking diversification, capacity and price continue to be key in decision-making.