The combined ratio of U.S. reinsurers deteriorated in 2005, skyrocketing 23 points thanks to record hurricane losses, according to data published by the Reinsurance Association of America.

The combined ratio of 26 reinsurers for 2005 came in at 129.4, compared with a similar group of carriers that reported a combined ratio of 106.2 the previous year.

The 2005 group wrote $25.3 billion of net premium, down about 11 percent from the $28.4 billion written by the 2004 group.

The sharp spike in the 2005 combined ratio represents not only the total record dollar amount of insured storm losses, but also their distribution over the year.

Four relatively small storms hit Florida in 2004, which meant considerably fewer losses for reinsurers–in part because of coverage provided by the Florida Catastrophe Fund. However, 2005′s Hurricane Katrina was the biggest storm loss ever, while much of last year’s catastrophe claims came outside Florida and did not have a state fund backstop.

William Wilt, property-casualty analyst for Morgan Stanley, said the size and distribution of storms this year will be critical as to how the share prices of reinsurers perform. “For instance, a $20-to-$30 billion storm season–or two-to-three times recent annual averages–will likely have a far lower impact on the group if that total comes from a series of $5-to-$6 billion storms as opposed to two $10-to-$15 billion events,” he wrote.

Mr. Wilt also said that increases in primary retentions and other underwriting changes have effectively shifted meaningful amounts of volatility back onto primary companies.

He said that not only are property reinsurance prices expected to rise this year, but reinsurers should also benefit from the May release of a new catastrophe model from Risk Management Solutions, which should fuel demand and tighten capacity.