Midyear reinsurance rates will remain flat or possibly soften, according to a report from Aon Re.
Bryon Ehrhart, president and chief executive officer of Aon Re Services, said that with the Jan. 1 renewal season a functioning worldwide property catastrophe reinsurance market returned.
“In such a marketplace, cedants would generally find sufficient capacity at terms and conditions that represented accretive underwriting capital for their organizations,” he said.
Aon said the following factors have contributed to the flat market:
o Restoration of reinsurers' capital basis as a result of a nearly catastrophe-free 2006.
o Significant participation in the catastrophe reinsurance business from nontraditional players such as hedge funds, high-net-worth individuals, institutional money managers and the asset-backed securities market.
o More than $10 billion of reinsurance capital freed from the additional capacity provided by the expansion of the Florida Hurricane Catastrophe Fund.
o Substantial easing of major rating agency capital requirements for insurers related to required capital for property catastrophe risks.
But Mr. Ehrhart also noted that reinsurers may be under pressure to return capital to shareholders as market conditions soften, thus restricting capacity.
In addition, the potential for reinsurance consolidation and related capital management measures may also reduce capacity, he added.
In the personal lines reinsurance market Aon said it sees a capacity increase of up to 25 percent, while complex commercial lines could see such an increase of 20 percent.
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