While admitting that casualty insurance market price changes in the wake of a huge property loss like Katrina are difficult to predict, executives at Everest Re still went out on a limb to say that "across-the-board" hikes–not just limited to property–are likely in 2006.
Joe Taranto, chair and chief executive of Everest Re Group, and Steve Limauro, chief financial officer, repeatedly made that prediction this morning during an earnings conference call, as they reported a third-quarter net loss of $417.7 million, or $7.41 per share, for their company.
Everest's earnings were heavily impacted by $784.6 million of pretax catastrophe losses, including $652.7 million related to Hurricane Katrina, Mr. Limauro reported.
"Across all of our segments pre-Katrina," which include insurance and reinsurance business in property and casualty, "markets were softening," but prices were generally adequate, Mr. Limauro said.
"Post-Katrina, markets are in a state of flux," he said, adding: "We expect this to resolve into a tightening market in the near term….And although property will be most affected, we expect all lines–and geographic markets–will ultimately be impacted."
Speaking from the PCI conference in Chicago, Mr. Taranto said that conversations with cedents have been enlightening.
"I'm hearing more and more managements at this convention [say] they are using this event [Katrina] to try to right the ship in more areas than property catastrophe," he said.
Noting that he had read one prediction indicating that property catastrophe reinsurance rates could jump 15-to-20 percent next year, he couldn't dispute the prediction.
"It's not my estimate, but…it could be," he said, adding that while casualty insurance is less impacted by Katrina (outside of some environmental losses), managements are reacting to "stop the slide" in pricing "across-the-board."
They are using Katrina as "a wake-up call [and saying,] 'Let's put the brakes on the rate decreases that were happening in casualty,'" he reported.
Ultimately, he said, "there is one pool of capital that supports most of this market. The same pool supports the property and the casualty markets; the same pool supports the marine and the aviation markets. So, you have to get rates moving" for all of it.
The third-quarter net loss that Everest reported this morning, $417.7 million, compared with net income of $11.5 million, or 20 cents per share, in third-quarter 2004.
Net written premiums in the quarter were $1.1 billion, down 10.9 percent from the comparable quarter last year.
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