NU Online News Service, Jan. 3, 12:04 p.m.EST

Only catastrophe-exposed and loss-affected reinsurance contractsexperienced any significant upward movement in rates, according toone top executive.

During a conference call, Aspen Re chief executive BrianBoornazian says the “insurance and reinsurance markets are startingto accept the need for change,” as the markets start to recognizethat the risks taken need more rate for adequate returns.

However, more change is needed “to reach rate levels that areadequate for exposures, and other external factors that affect ourindustry's profitability,” Boornazian says from Bermuda.

Though all signs—very high catastrophe losses, the release ofRMS Version 11, and low investment yields—point to the formation ofa hard market, Boornazian says the market began to harden only incertain lines at Jan. 1 renewals, but it is “not a classic hardmarket.”

According to Aspen Re's head executive, rates at Jan.1 renewalsrose between 7.5 percent and 15 percent for larger propertyinsurers and excess and surplus lines writers in the U.S. Moreincreases were seen on contracts affected by losses.

“Winter storms and record tornado activity in 2011 causedsignificant market losses,” Boornazian says. “As a result, priceshave adjusted materially on loss-affected contracts, sometimes by25 percent or more.”

Turning to Europe, the renewal season for property business sawonly low sing-digit percentage increases, Boornazian reports. InAsia, January is not a significant time for reinsurance renewals.Real change here is needed, Boornazian says, but “early signs arethat we will see inconsistent corrections.”

Rate improvements in casualty reinsurance “remains elusive,” headds. Factors that have kept rates from rising—excess capital inthe market, reserve releases, and slower economic recovery—may beshifting to point toward positive signs for rate improvements. Forinstance, reserve releases have been reduced recently and carriersare walking away from underpriced business, according toBoornazian.

While the international casualty market remains soft, the U.S.casualty market saw “pockets of rate increases in response tocontracts with loss development, and very limited requests for ratedecreases.”

Looking at specialty reinsurance, Boorniazian says there wasmixed rate results at Jan.1.

The energy market saw rate increases of at least 25 percent—acontinuation of the effects of the Deepwater Horizon disaster.

Marine contracts were renewed at flat rates and increasedcompetition in the terrorism market has led to rate reductions ofbetween 5 percent and 15 percent, Boornazian says.

In a late December report, independent reinsurance brokeragefirm Holborn says U.S. reinsurance programs with rate increasesoutnumbered those with decreases over the last year. Primary ratesin the U.S. have been rising.

The firm says it expects to see more adverse development frompast catastrophes—adjustments to losses from earthquake and tsunamiin Japan, quakes in New Zealand, and flooding in Thailand. Thelosses will reduce reinsurers' profits in 2012, Holborn says.