NU Online News Service, July 10, 4:00 p.m.EDT

Reinsurance renewals continue to firm, but ample capacity isoffsetting some pricing pressures produced by pastcatastrophe activity and catastrophe-model changes, saysreinsurance broker Guy Carpenter.

“In 2011 the industry experienced one of its most challengingyears, due to the tremendous volume of catastrophe losses acrossthe globe,” says Lara Mowery, Guy Carpenter's head of globalproperty specialty, in a statement. “With light losses to date in2012, July 1 property renewals are marked by disciplinedunderwriting amid plentiful capacity. Based on the impact of Julyincreases in 2011 and available capacity, pricing trends havemoderated.”

In a 22-page report titled “StrongRisk Assessment Focus Amid Plentiful Capital During 2012Renewals,” Guy Carpenter, a subsidiary of Marsh & McLennanCompanies, notes that losses for the first quarter of 2012 were at$11 billion, a tidal drop from the $76 billion loss experienced bythe reinsurance industry worldwide at the same time last year.

Furthermore, the capital position in the broker's globalreinsurance composite for Q1 2012 increased 4 percent to $184.5billion from year end 2011, the result of continued reservereleases and falling yields on high-grade fixed-income securities.Guy Carpenter predicts these favorable trends to continue intoJanuary of next year.

Property pricing in the U.S. rose by more than 6 percent so farin 2012 compared to 2011, as reinsurers reacted to the release ofnew model RMS version 11 and last year's cat losses.

But the report notes that pricing trends have moderatedthroughout this year. Overall, Guy Carpenter says, it is moredifficult than ever to generalize with respect to pricing in theproperty-catastrophe market. Significant pricing adjustments, bothup and down, still exist depending on a line's individualcircumstances.

David Flandro, Guy Carpenter's global head of businessintelligence, observes, “Catastrophe losses have been relativelylimited for the reinsurance sector to date in 2012. As a result, wehave seen a continued improvement in the sector's dedicated capitalposition, which has mitigated price increases. As we enterhurricane season, we will continue to track catastrophe activity,reserving and asset-side issues in our analysis of pricing trendsfor the remainder of the year.”

For other reinsurance business, United States casualty linesshowed rate increases as of July.

Worker's compensation showed “the most evident rate hardening,”while general liability rates hardened slightly.

Catastrophe bond issuance remained vigorous. Fifteen GuyCarpenter transactions came to market in the first quarter of 2012,totaling $3.4 billion. Risk principal outstanding for the firsthalf of 2012 was at $13.5 billion, a whopping 113 percent increasefrom the prior year, and almost as high as the issuance surgepost-Katrina, Rita and Wilma, which topped a record $14billion.