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The soft market continues to challenge reinsurers, and although 2010 has seen disasters, the events will not be enough to harden pricing, according to a panel of senior reinsurance executives.

At the Casualty Actuarial Society (CAS) Seminar on Reinsurance held recently in New York, CAS said in a statement, George Venuto, executive vice president, Willis Reinsurance, told attendees that trying to please primary casualty insurers is very difficult to do right now, as the market continues to see downward pressure. He added that it is not "the best pricing environment on the insurance and reinsurance side."

Venuto said that terms and conditions are softening somewhat and loss trends are increasing. Capacity remains available, especially for property and casualty.

Damien Magarelli, director, Standard & Poor's, said the 30-to-40 percent price increases witnessed after Hurricane Katrina for some property lines has given way to zero-to-10 percent declines in 2010.

"Additional capacity has contributed to declining prices," he said.

Magarelli noted that 2010 so far has been active with disasters, but has not seen events that will prompt pricing increases.

Referencing some of the larger 2010 events, he said the Chilean earthquake was significant--though smaller than Northridge--with losses expected in the $8-to-$10 billion range.

"The Gulf oil spill is about a $1.5 billion insured property loss," he added. "There may be litigation in terms of the debris cleanup, but this is not expected to be a significant insurance industry event, in our view."

But in general, Magarelli said, "floods and storms in the Northeast will not change the pricing cycle. If you have a regional carrier, their earnings will be affected, but not dramatic enough of an impact for a new pricing cycle."

Magarelli said 2010 catastrophe events have reduced the margin reinsurers had going into hurricane season, but it's not outside the normal budget.

"It's not so much about where we are, but where we are going," said Magarelli, referring to the market cycle. "Frequency has been declining for a number of lines for many years. That has propelled earnings to a greater degree."

Venuto said he thought the industry may have a loss ratio environment similar to that of 1995. He said, "We are getting close to where there's not much rate left to give back."

However, Magarelli said unlike the 1990s, reinsurers are not opening their capacity levels to what they were in the past and they are more restrictive in terms of capacity.

Magarelli also said reserves are adequate, but companies are living off "the 2002-2005 accident years."

The panel was moderated by Michael E. Angelina, chief actuary and chief risk officer, Endurance Specialty Holdings Ltd.

Special Reports /

2010 Disaster Events Unlikely to Turn Challenging Soft Market

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