A quick survey by an analyst unit has found that mostreinsurance brokers expect reinsurance rates for catastropheexposed property coverage to increase with January 1 renewals.

Tamara K. Kravec with Bank of America Equity Research wrote thatbrokers told them premium rates will continue to rise“significantly” during the January renewal season despite arelatively loss-free 2006.

The rates will be hard in other lines as well, and terms andconditions aren't expected to loosen after tightening in responseto the 2005 hurricanes, Bank of America said.

The analysts said their findings were based on interviews with17 reinsurance and Lloyd's brokers representing a broad spectrum ofbusiness classes and geographies.

Bank of America said as a result of its research it isreiterating “Buy” ratings on Aspen Insurance Holdings and AxisCapital.

The analysts said phone conversations with brokers had confirmedits earlier thesis for the reinsurance sector foreseeing strongenough conditions in 2007 for reinsurers to write a good volume ofprofitable business, even through growth rates may slow.

Aspen and Axis, Bank of America found, “are well positioned totake full advantage of the hardest areas of the market.”

Of 12 brokers interviewed concerning the reinsurance propertymarket, six said premium rates at Jan. 1 would rise by 20 percentor more, five said rates generally would rise and one said heexpected relatively flat rates, the analysts reported.

Although it is early in the renewal season, Bank of America saidseveral brokers expressed a strong conviction that increases aheadwill be of a large magnitude.

Analysts said it was a big surprise that contrary toconventional wisdom that the European market is soft there is “agrowing consensus that property rates in certain parts of Europeare actually beginning to stabilize or even to rise.”

However, they said they also found a broad consensus thatpremium rates elsewhere in Europe were too low and showed no signsof rising.

For its overall view, Bank of America said it has “a cautiousview of the reinsurance group. Strong increases on propertyreinsurance, good underwriting margins on casualty reinsurance andimproved risk management should drive book value growth, whilevaluation multiples could decline due to falling growth rates.”