September 2012 Bermuda Re/insurance


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s Dieter Berg, senior executive manager, marine at Munich Re indicated, some recent increases achieved on reinsurance rates have reflected the “‘unprecedented’ losses during the last couple of years”—Deepwater Horizon, Gryphon Alpha and Rena, which have amounted to hundreds of millions of dollars in losses—but market losses are not always reflected on the line. “A huge portion of recent losses were passed on to the reinsurance market,” said Berg, adding that Munich Re expects “development towards risk adequate pricing to continue” in reinsurance, but that “by contrast, price development in the primary insurance market is still predominantly flat”.


Felix Vogler, head of marine and energy at Arch Re, said that major losses such as “West Atlas, Deepwater Horizon and Gryphon Alpha have taken billions of dollars out of the energy market in recent years and reinsurers have picked up the majority of the claims”. Citing the gas leak on the Elgin platform earlier this year, Vogler said that if a major incident had occurred it “could have taken a further $7.5 billion of market premium easily”. The threat posed by potential losses from events such as Elgin “should have proved an eye-opener for risk managers as regards the kind of exposures we are dealing with in this class of business. While the reinsurance market is there to cover such catastrophic events, we need to ensure that we are charging the correct price for the exposures we take on”.


Jerry Rivers, senior vice president and chief operating officer at OCIL, gave a rather different picture of the pricing environment, indicating that for OCIL—which is predominantly an insurer— “pricing in the energy insurance market is experiencing its third year of increases in exploration and production, pipelines and integrated oil. But for new business coming into the market, capacity is tight”.


James Summers, head of global marine and energy at Guy Carpenter, predicted that the pricing environment for reinsurers would remain largely flat. He indicated that recent major losses such as Deepwater Horizon had by now “been priced into the market”, although he did indicate that stress points will remain around the


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