Property catastrophe rates increasedÂ Â for midyear renewals, but not as much as reinsurers had hoped and insurers had feared, brokers and reinsurers say.
Industry experts say reinsurance rates generally increased in the 10% to 20% range. Reinsurers had hoped for higher increases, but were thwarted in part by primary insurersâ€™ push-back amid adequate capacity.
Meanwhile, the casualty market remains relatively flat, observers say.â€œI think folks expected more hardening at June 1 and July 1 than what materialized,â€ said William H. Eyre Jr., managing director and chief executive officer of Philadelphia-based Towers Perrin Reinsurance. â€œBut overall, property prices are moving up and casualty reinsurance appears poised to be headed that way in 2010,â€ although â€œon a fairly moderate basis.â€
â€œFrankly, Iâ€™m surprised by it because it just seemed like capacity would be tighter, everybody would be pushing for more rates based on reduced investment income and everything else, and I havenâ€™t seen it,â€ said Rod Fox, CEO of intermediary TigerRisk Partners L.L.C. in Greenwich, Conn.
Joseph M. Fedor, executive vp of intermediary U.S. Re Corp. in New York, said midyear renewal rates were not as high as anticipated earlier because of â€œreluctance on the part of buyers to pay such increases, and also (a move) to not purchase the level of limits they might have purchased in the past, leaving a surplus of capacity available, which then acted as a competitive factor to reduce prices.â€
â€œThe financial markets steadied somewhat since the autumnâ€ and balance sheets have stabilized somewhat as well, said Chris Klein, head of the business intelligence group at Guy Carpenter L.L.C. in London.
Neither the Tallahassee-based Florida Hurricane Catastrophe Fund nor the Austin-based Texas Wind Insurance Assn. renewed their reinsurance programs. This â€œdampened the hardening that might otherwise have occurred in the marketplace,â€ said Bryon G. Ehrhart, chairman of Investment Banking Group and CEO of Aon Benfield Analytics at Aon Benfield in Chicago. â€œBut,- in general, the market has, thankfully, been functional,â€ Mr. Ehrhart said. â€œReinsurers maintained the capital necessary to maintain an orderly market.â€
â€œThereâ€™s a continuing disconnect between reinsurance and primary companies, and what is acceptable pricing for catastrophe business,â€ said Richard DiClemente, president and CEO of New York-based THB Intermediaries Inc.
There is â€œdefinitely push-back from the primary side on reinsurance pricing and, because of the competitive market…they will continue to write business even if they canâ€™t match up their pricing with the pricing of reinsurance. Theyâ€™ll simply retain the business if they have to,â€ Mr. DiClemente said.