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Pricing: an ongoing debate


If you are a reinsurer, the answer to the above question these days seems to be an emphatic ‘no’. Reinsurers believe the debate about excess capital permitting price reductions is now made increasingly irrelevant due to technical pricing. However, brokers apparently still tend to talk up the possibility of price cuts due to the amount of spare money swirling around. Intelligent Insurer looks at the arguments on both sides.


H


igh capital levels among reinsurers have often been used as a justification for lower prices, mainly by brokers, but has the development of technical pricing made the debate redundant? Or are reinsurers still willing to slash prices to grow business if they have


sufficient capital in the bank? The debate surfaced again in Monte Carlo in September when both Aon Benfield and Guy


Carpenter used their opening speeches to describe the excess capital found in reinsurer’s balance sheets, while in the same sentence, predicting further slight softening of prices.


In fairness to both companies, they were also advocating other uses for the money such as


investment in technology, innovation and emerging markets—anything it seems that will prevent the money being returned to shareholders. Nonetheless, capital and pricing were often mentioned in the same breath.


November 2010 | INTELLIGENT INSURER | 19


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