NU Online News Service, Jan. 2, 12:52 p.m.EST

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High losses from 2011 are producing greater underwritingdiscipline among reinsurers when it comes to catastrophe-exposedrenewals, according to a major insurance broker.

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In a report titled, “Change is in the Wind,” Willis Re releasedFriday, the reinsurance broking division of Willis Group Holdingssays with the majority of this year's “catastrophe losses arisingfrom un-modeled or inadequately modeled perils or territories,reinsurers are being more forceful in their demand for greatertransparency of data.”

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Willis Re says that reinsurers are seeking to sub-limit theirexposures to make the risks more manageable during the 2012 renewalperiod.

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This was the second-worst catastrophe year for insurers onrecord, Willis Re says, with insured losses in excess of $100billion and reinsured losses of more than $50 billion.

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“There is work to be done by the industry to better understandthe nature of the natural catastrophes which have caused 'surprise'losses this year,” says Willis Re, noting the flooding in Thailandas one example.

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The market is not witnessing blanket increases, notes Willis.Instead, individual loss history and “perceived exposure movements”are driving increases.

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Rate movements, Willis adds, are “largely being driven by theimmediate earnings challenge of 2011 rather than the classiccapital shortage of an historic hard-market rating turn.”

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Overall, capital levels in the global reinsurance industry “areonly marginally down” from the beginning of 2011, says Willis Re.If 2012 is profitable, it is not clear if the market will seesustained hardening, says the broker.

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“With the exception of a few problem long-tail classes,reinsurers have concentrated on increasing prices for naturalcatastrophe exposed covers, which is leading to wide pricingdifferences by class,” says James Vickers, Willis Re chairman ofinternational business in a statement.

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Underscoring the extent of catastrophes this past year intheUnited States, the Insurance Information Institute says thenumber of separate federal government declared major disastersreached 99 in 2011, surpassing a record 81 set in 2010.

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That figure is triple the average of 34 per year dating back to1953, I.I.I. said on Friday.

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“Catastrophes striking the United States in the first ninemonths of 2011 caused $32.6 billion in direct insured losses,nearly double the $18.6 billion in catastrophe-caused directinsured losses insurers generally incur over the first nine monthsof any given year,” according to Robert Hartwig, president ofI.I.I. in a statement, citing figures released by ISO's PropertyClaim Services.

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“The $32.6 billion figure doesn't even include the significantinsured losses which arose after the pre-Halloween snowstorm, whichcaused enormous damage to multiple states along the Atlanticseaboard,” Hartwig continued. “Coupled with other events in 2011'sfourth quarter, direct insured losses could exceed $35 billion thisyear.”

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Hartwig notes that despite the frequency of catastrophes intheUnited States, policyholder surplus fell only 4 percent to$538.6 billion as of Sept. 30, compared to $559.2 billion at theend of 2010.

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“The policyholder's surplus number is a sure sign that U.S.property & casualty insurers remain well capitalized andcapable of paying future claims,” says Hartwig.

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