Catastrophe-reinsurance pricing will likely see alow-double-digit drop at Jan. 1 renewals thanks to the “quietestU.S. Atlantic hurricane season in decades,” says Fitch Ratings.

This hurricane season saw the fewest named hurricanes since 1982and no major hurricanes, Fitch says.

The light activity should translate to higher industry earnings,says Fitch, but “much of the extra profit is likely to be returnedto investors through dividends and share buybacks.”

The quiet hurricane season will further pressure U.S. excess ofloss catastrophe pricing that has already been weakened in partbecause of additional capacity from alternative capital sources,says Fitch.

And alternative capital appears to be in the market to stay, atleast in the near term, Fitch Senior Director of Insurance BrianSchneider says. He says the type of risk being transferred to thecapital markets tends to be primarily the well-modeled U.S. peakzone type risk. “That's something investors and reinsurers have agood handle on,” he says.

Even in the case of a significant loss event, Schneider says thebiggest investors in these risks—pension funds—will likely stickaround. Pension funds, he says, “tend to be more careful when theyget into new asset classes,” and they do not put a significant partof their assets into risky classes, limiting their allocation to 5percent or less.

Hedge funds, which are more susceptible to moving in and out ofclasses, may pull back in the case of a large-loss event, Schneidernotes, but he says pension funds make up far more of the newcapital, and also represent the biggest potential source ofadditional capital going forward.

Schneider says the near future could see alternative capitalmoving more to areas outside the U.S., “maybe into Europe as theirmodeling gets better.”

Additionally, a Property Claim Services report oncatastrophe-bond issuance through the first nine months of 2013shows, “This year has already become the third-most active in thehistory of the catastrophe-bond market, and a new record appearslikely.”

The report, “PCS third-Quarter 2013 Catastrophe Bond Report:Broader and Deeper” states, “More than $5.4 billion came to marketin the first nine months of 2013, up approximately 32 percent from$4.1 billion in the first nine months of 2012.”

Schneider says the presence of this new capital will have alonger-term impact to the traditional property catastrophereinsurance model, and companies focused in this area will continueto be pressured.

Given the new capacity, Schneider says he does not expectproperty catastrophe rates to rise significantly even after a majorloss event.