NU Online News Service, June 30, 12:00 p.m.

Although reinsurance prices were down for the June 1 renewals,one reinsurance executive recently speculated that price hikes inthe insurance loss warranty (ILW) market--fueled by the DeepwaterHorizon disaster--could eventually spread to the reinsurancemarket.

Jeff Consolino, executive vice president and chief financialofficer for Bermuda-based Validus Holdings, made his observationsabout the ILW market during a session of the Oppenheimer CEOInsurance Summit earlier this month.

During the session titled "Reinsurance: How Have Recent NaturalCatastrophe and Weather Events Impacted the Prospects forReinsurance Pricing?"--which is available on an archived webcast(http://investorrelations.validusholdings.com/phoenix.zhtml?c=207971&p=irol-EventDetails&EventId=3131788)--Mr.Consolino agreed with most commentators that it is too early totell whether liability exposures related to the sinking of theDeepwater Horizon rig are enough to make a dent in, or even turn,the casualty insurance market.

"But what we do see is the ILW market now responding to theevent with rates [increasing] 40-, 50- and 60 percent," he said,noting that companies that provide retrocessional protection toproperty reinsurers in the Gulf of Mexico rely on ILWs to managetheir aggregate exposures.

Like property-catastrophe reinsurance, ILWs respond whencatastrophic loss events occur, but unlike traditional reinsurancecontracts, ILWs are triggered when total industry losses exceed someagreed upon level.

As a result, Mr. Consolino said that "retro pricing should go upand that should work its way all the way down the chain--ontoreinsurance pricing and down to the primary pricing as well."

During the session, Mr. Consolino noted that Validus, which hasbeen a fairly major player in the marine and energy market sincethe company's launch in 2005, announced back in April that itexpects its own losses from the Deepwater Horizon event to fall inthe $37-to-$45 million range.

The range of loss estimates is net of reinstatement premiums,reinsurance, retrocessional and other recoveries, Validus said.

Referring to analyst and broker reports stating that offshoreenergy insurance rates are up 15-to-20 percent for rigs operatingin shallow water, and 50 percent or more on deep water, Mr.Consolino said "we probably agree with that in the marine andenergy sector."

He added, "The longer-term implications for the broader marketremain to be seen, and I guess will play out over much longerperiod."

During the session, Mr. Consolino and three other reinsurancecompany executives reported that U.S. property reinsurance rateseroded at the June 1 renewals--an important property reinsurancerenewal date for Florida-specific insurers and others.

The executives reported 10-to-20 percent rate declines for peakzones, saying that with this year's June 1 prices, U.S. propertyreinsurers basically gave back rate increases they saw last year atthe same renewal date.