Companies maintaining or increasing catastrophe exposure remain the best positioned to take advantage of the dislocation in the wind-exposed property insurance and reinsurance markets, said one leading analyst today.

Bank of America insurance analyst Brian Meredith noted that in the first quarter of 2006 only Arch Capital, Chubb, Hartford and Renaissance Re either kept such exposure flat or increased it.

“Not surprisingly, except for RenRe, these companies had among the lowest losses from the hurricanes last year as a percentage of equity,” Mr. Meredith wrote.

Arch, Max Re and RenRe are now among the best positioned to take advantage of the new playing field in the wind-exposed primary and secondary markets, he asserted.

As the analyst sees it, while 80 percent of the companies in his coverage universe generated upside earnings surprises, a slightly greater percentage of them missed expectations for net premium written.

“In the reinsurance area, it was by a material amount,” he wrote.

Exposure management was the key factor in these top-line misses, he believes. “On the primary side, higher reinsurance costs and a reduction in wind aggregates led to lower premium volume,” Mr. Meredith asserted.

Moreover, pricing outside of U.S. wind-exposed business remained relatively competitive, with little business changing hands–contributing to weaker than expected premium.

“In the reinsurance industry, lower wind aggregates and increased retentions by ceding companies,” as well as the fact that “in some cases companies elected to preserve capacity for midyear renewal in anticipation of better pricing, hurt premium volume,” according to Mr. Meredith.

Overall, with price increases and attractive return-on-equity figures, reinsurers and commercial lines carriers are attractive for investors, while personal lines writers remain unattractive, he said.

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