With plenty of capital still in the pipelines, no industrywide price increase is expected from Japan's Tohoku earthquake—and any talk about a hard market is being greeted with skepticism, at least by one financial analyst.

In an analyst's note from Deutsche Bank Securities Inc., Joshua Shanker says, “The industry continues to generate more capital than it is losing from catastrophes.”

What will lead to a broad-based price increase is capital-driven demand and carrier acknowledgment of long-term underreserving, he notes.

Property-catastrophe reinsurance pricing may increase, he says, but this is expected to have a muted effect on primary insurers' profit and loss in the United States and Europe “with their more-than-adequate balance sheets to dramatically reassess their risk profiles.”

Shanker says, “We do not think buyers of insurance or reinsurance are likely to respond to the desire to raise prices amidst apparently healthy profitability.”

Losses from the Japan earthquake will mean losses for property-catastrophe reinsurers, he continues, but “in most cases” this will prove to be an earnings event, not a balance-sheet event.

Demand for reinsurance is not expected to increase “significantly,” he notes, nor will there be an increase in appetite from reinsurers for nonpeak earthquake risks (insurance for locations that are not considered a high-risk zone and where exposures are lower), which translates into no significant increase in premium to offset losses associated with the earthquake.

Deutsche Bank remains positive in its assessment of reinsurance carriers it follows, saying that reinsurers avoided underpricing primary insurance risks during the 2008-2011 accident years and tend to have less tail risk due to the higher number of property risks in their portfolios.

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