Reinsurance pricing still shows a wide divergence depending on the sector involved, according to a brokerage firm's study.

In its report following the July 1 renewal season, London-based Willis Re said that its previously described “tale of two markets” continues. Softening pricing in many lines contrasts sharply with property-catastrophe covers for U.S. coastal and Caribbean property experiencing the “worst of times.”

Willis Re CEO Peter Hearn said the pricing outlook in the immediate term remains uncertain and highly volatile, particularly in the event of another major storm.

“It is likely such an event will accelerate the redeployment of capital and make it much more difficult to secure traditional reinsurance protection,” he said.

Mr. Hearn noted the full impact of the 2005 record losses can be seen in the new set of governing assumptions primary and secondary reinsurers are developing that de-emphasize catastrophe-prone risks.

“On a macro basis, this strategy accelerates and deepens the hardening of the catastrophe-exposed property market,” Mr. Hearn said.

In addition, he said, it also depresses prices in the noncatastrophe exposures.

Ratings agencies have forced reinsurers to both reduce aggregate accumulations in peak catastrophe zones and diversify their writings, Willis Re found.

They have done this by employing substantially more conservative and stringent parameters to evaluate catastrophe management protocols maintained by insurers and reinsurers, according to the report.

Willis Executive Vice President James Kent said that with the hard market for wind-exposed property during the June and July renewal seasons, reinsurers chose to support those cedants able to demonstrate sound strategies for managing their portfolios and catastrophe risk.

“As a result, proactive interaction with insurers well in advance of the renewal cycle proved beneficial for many ceding companies,” he said.

Last year's newly formed companies–the “Class of 2005″–did not have a meaningful impact on capacity for a number of reasons, including the evaporating retrocession market, Mr. Kent noted.

“Additionally, while there was significant activity with the capital/alternative market vehicles, particularly reinsurance sidecars, no meaningful relief materialized for cedants,” Mr. Kent said.

Special Reports /

July Reinsurance Renewals Show Price Split

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