European Reinsurers Regain Momentum

An analysis of the reinsurance market January renewal season results has found European companies remain a strong factor, according to London-based Benfield brokerage.

Benfield analyst Leon Janeke, one of the authors of the Benfield European Reinsurance Quarterly Report, said, “Little more than 18 months ago, many favored the specialist players in Bermuda above the European reinsurance groups.”

But, he said, the January 2006 renewal season underlined the value of long-standing relationships and the stability offered through diversity. “There were reports of competition from some specialists turning to Europe in search of diversification,” he said.

Premium income of the Benfield European Reinsurance Quarterly group rose by 4 percent at the January 2006 renewal, compared with a 5 percent fall last year.

Paris-based SCOR displayed the strongest growth at 25 percent, while Converium, Zug, Switzerland, suffered a 3 percent fall. “Higher client retentions, a continuing shift to nonproportional covers and adherence to strict pricing discipline all restrained premium growth,” the report stated.

The January renewal failed to live up to the confident expectations of widespread hardening of reinsurance pricing following the hurricanes of 2005.

“The renewal picture is of a cr?me brulee market–hard on the top, but soft underneath,” the report said.

Substantial renewal price increases were obtained on loss-affected catastrophe business, but prices were broadly stable in other lines. “There was no easing of terms and conditions,” the report stated.

Solid ratings matter in this season. They enabled Hannover Re to select from a wide spectrum of business offered and to enjoy record signings. And Zurich-based Swiss Re achieved preferential terms such as private layers, lead fees or reduced commissions.

Benfield's report said that the groups all expect a combined ratio under 100 on renewed business, given a more normal catastrophe burden.

The report emphasizes an underwriting profit will be particularly crucial because while interest rates have stabilized they are below the levels of recent years, leaving little scope for investment subsidies.