NU Online News Service, July 9, 2:55 p.m. EDT

The first half of 2010 has not been kind to reinsurers, who were just beginning to enjoy some recovery from the financial fallout of 2008, according to a reinsurance broker's report.

New York-based reinsurance broker Holborn issued its Mid-Year 2010 Market report, observing that the reinsurance marketplace rebounded in 2009 from a combination of high level of loss activity and the financial market downturn.

Catastrophe experience last year was "benign to the worldwide market, with no individual event costing reinsurers over $1 billion."

Equity and currency market recovery last year, along with improvement in stock prices, meant capital improved to a point where "most now have far more capital than at mid-year 2009."

However, the trend has flattened, Holborn said, after significant losses in Chile from the Feb. 27 earthquake and the "significant liability exposure" from the Deepwater Horizon disaster in the Gulf of Mexico. Equity market volatility has not furnished reinsurers with equity gains they have enjoyed, and a strong dollar has had a modest reduction to some reinsurers' capacity.

"We estimate this is the worst-ever first half for large reinsured losses," said Holborn.

While capacity remains abundant, prices remain soft, the broker continued. Companies are maintaining underwriting discipline, but ceding companies are placing programs at improved terms, the broker said.

Holborn said the worldwide reinsurance industry is modestly profitable but volatile, shrinking organically and moving out of the United States.

Net earned premiums in 2009 were $187 billion with a combined ratio of 85 and net income of $26 billion.

The broker said that for 2010, the global reinsurance market will see lower underwriting profits driven by the soft market. The surplus will be lower based on falls in the British pound and Euro for the first half of the year. Premium volumes will be lower because any rate increases will not outpace the continuing soft market.

Copies of the report are available by contacting Holborn at 212-797-2285.

Special Reports /

Losses, Weaker Investments, Soft Market Hurting Reinsurers In 2010

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