Property-catastrophe reinsurance rates in the United States have significantly decreased despite disaster losses from the Chile earthquake and storms in Australia during the first half of 2010, according to reports from a trio of top brokers on July 1 renewals.

Guy Carpenter's report–”Reinsurance Renewal July 1, 2010: Capital Cushion Continues to Impact Pricing” –found that property rates have decreased by 10-to-15 percent. Willis Re said rate reductions were as high as 25 percent in Florida, while Aon Benfield reported property-catastrophe price declines of 10-to-20 percent.Guy Carpenter's report (http://bit.ly/bDDk8C)–examining reinsurance conditions across the property, marine and energy, workers' compensation, international casualty and other markets–found that overall, reinsurance rates have continued to decline.

Predictions of an active hurricane season have had only a slight impact on June and July renewals in the property market, with quoting behavior firmer than expected, according to Guy Carpenter.

In the energy sector, Guy Carpenter said that although the Deepwater Horizon loss is potentially a “market-changing event,” it is geared principally towards energy and liability exposures, making it difficult for reinsurers to justify rate increases for clients writing traditional cargo and hull accounts.

But rate increases of more than 10 percent were seen for deepwater drilling risks similar to those of the Deepwater Horizon, according to the report.

The report also noted that workers' comp rates have barely changed and that international casualty rates have remained relatively stable.

Willis Re's report–”Running on Empty” (http://bit.ly/bDDk8C)–also found that the global reinsurance market has experienced a continued, gradual decline in pricing, noting that there have been no “general market moves” to increase rates.

Willis Re said in its report it does not expect any rating upturn in the near future unless a major loss event occurs that removes a considerable portion of the industry's excess capital.

Their report also found that casualty pricing remains generally soft, with rates continuing to decline.

In its July 1 “Renewals Update” report (http://bit.ly/bEVKKh), Aon Benfield said reinsurance rates continue to decline in all major regions that have not faced significant catastrophe losses in the last 12 months.

Because of the Chilean earthquake and storms in Australia, reinsurance renewals have increased 45-to-65 percent in Chile and 30 percent in Australia, according to Aon Benfield. Willis Re also noted price increases in Chile renewals from 40-to-70 percent, while Guy Carpenter reported increases from 50-to-70 percent.

However, these increases are the exception. Bryon Ehrhart, chief strategy officer for Aon Benfield, said that “record-high reinsurer capacity continues to grow more quickly than cedent demand, producing further downward pressure on rates in almost all market segments.”

As for the rest of the year, “the direction of the market is hard to forecast,” according to Chris Klein, director of reinsurance market management at Guy Carpenter. “Abundant capacity has depressed pricing, but the depletion of reinsurers' catastrophe loss budgets may help to stabilize the market.”

Special Reports /

Falling Reinsurance Rates Help To Keep Market Soft

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