The “furious” start of the June and July renewal season bodes well for the reinsurance industry, said one leading analyst.

Morgan Stanley senior property-casualty analyst William Wilt said that reinsurers want an early start so they can strategically deploy their capital and utilize aggregate limits opportunities.

“We sense that aggregates will be filling up sooner rather than later as the rating agencies are requiring more capital to support premiums,” Mr. Wilt wrote.

This is just one of the many factors that have led Mr. Wilt to take what he sees as a view contrary to the norm on this year's prospects for the reinsurance industry.

“Over the past few months, people offering a positive spin on the reinsurers have had about as much chance of being heard as a political aide to a freshman Congressman visiting the set of Cross Fire,” Mr. Wilt wrote.

The sudden demotion of catastrophe models as underwriting tools in favor of the monitoring of aggregate exposures will be looked upon favorably by the rating agencies, he said.

Another factor pushing demand up is the trend for primary companies that are attempting to trim catastrophe exposures with higher level purchases while retaining lower level risk. For example, some retentions are moving from about $250 million to $500 million, and from $500 million to $700 million. “We think these are significant shifts,” he wrote.

Although coverage may be available at those levels, the prices offered by reinsurers will force the decision of the primary companies to retain more at the bottom and buy higher limits at the top layers of the programs, he wrote.

And don't look for all the new post-Katrina capital flowing into Bermuda to put much of a pinch on pricing, as it is mainly “filling gaps in programs and not creating excessive competition or causing the disruption some had feared,” Mr. Wilt wrote.

Special Reports /

Analyst Bullish On Re Sector

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