After a year of sharp increases on catastrophe property risks,there may be some relief in sight for buyers going into 2007, aninsurance brokerage executive said.

Alfred Tobin, managing director of Aon's national propertypractice, said that a profitable 2006 for insurers could spell somerelief for insureds on catastrophe risks, and another lighthurricane season could allow that relief to continue.

His observations came yesterday during a Web seminar sponsoredby Chicago-based insurance brokerage Aon.

However, noted Aaron Davis, director of Aon's national terrorismand property resource practice, rates are expected to maintainincreased levels between 100- and 300 percent through the January 1renewal cycle.

There continues to be insufficient capital dedicated tocatastrophe risks, he noted, adding that capital marketvehicles--such as sidecars, which are capital vehicles created tocover an individual risk--would continue to be important componentsto solving coverage issues.

"New capital is not sufficient to meet demand for this newcapacity," said Mr. Davis, adding that the capital markets can onlybe counted on for financing so long as they receive record returnsfrom the hard catastrophe market.

Gail Norstrom, managing director, Aon national propertypractice, said when it comes to looking for pricing benchmarks,accounts with natural catastrophe exposures, but no hurricanelosses, have seen increases of greater than 50 percent.

While these catastrophe risks with losses have seen increaseswell over 100 percent, for layered accounts, Mr. Norstrom noted,the second, third and fourth excess layers were experiencingsharper increases than in the past.

Average rate increases for accounts Aon monitors are at 33percent, he said.

However September and October showed some moderation and mayindicate "the cooling of the upward pricing we have seen over thepast year," Mr. Norstrom advised.

Large accounts (average premium of $7 million), he went on tosay, saw the sharpest increases, while smaller accounts experiencedless increase. The exceptions, he said, were risks in the Southeastwith hurricane exposures, and California accounts with earthquakeexposures.

Sixty-six percent of Aon's property accounts experiencedincreases, Mr. Norstrom added.

Mr. Tobin said insurers do not see the hardening in the propertymarket as cyclical pricing, but instead, other factors areproducing the increase, and will continue to do so in thefuture.

Pressure from rating agencies to keep adequate capital to covertheir risks, increased cost for reinsurance, and changes in modelsthat have increased loss estimates are conspiring to keep premiumshigh, he explained.

With predictions of record profits for 2006, it should producesome relief for customers, he said. One carrier, FM Global, isgiving credits to its long-term customers. As a result of theirimproved financials, pricing may not see dramatic decreases, butthere may be increased competition that should help customers,noted Mr. Tobin.

"We are not going to see catastrophe pricing return to pre-2005levels anytime soon," Mr. Davis advised despite some signs ofoptimism.

On the issue of terrorism insurance, he said the recent electionresults may improve the prospect of passage of some type of federalbackstop program.

Prior to the election, Aon felt passage of an extension or a newbackstop was 50-50, but a Democratic Congress has improved thoseprospects, he said. However, the Bush administration will stillneed some convincing to prevent the president from pulling out theveto pen, he added.

A replay of the seminar titled "U.S. Property Market Overview:Making Sense of the Maelstrom" is available online atwww.aon.com/webseminars.