Another positive development, the firm said, is that European reinsurers' management teams are adamant that their underwriting discipline will be maintained and that they are prepared to "sacrifice volume for profitability."

Benfield found that disciplined underwriting resulted in firms declining business that fell short of pricing targets. Benfield said these actions contributed to a drop in premiums during the first quarter.

Among the big European reinsurers, SCOR saw its gross non-life reinsurance premiums for the quarter fall 46 percent to 485 million euros, or approximately $588 million. Hannover Re saw its non-life reinsurance premiums drop by 20 percent to 1.18 billion euros ($1.43 billion), while Munich Re's fell by 14 percent to 4.24 billion euros ($5.14 billion).

Converium was the only major player to boost its non-life reinsurance premiums, up 10 percent to 1.23 billion euros ($1.49 billion). "European reinsurers' senior management are adamant that underwriting discipline will be maintained, and they are prepared to sacrifice volume for profitability," noted the Benfield report, which also observed that "successful enforcement will be a critical factor for the financial health of the industry."

Benfield also noted that European reinsurers, while free from major losses from natural catastrophes, still saw their large losses rise during the first quarter, but they nonetheless remained within long-term trends.

Also on a positive note, better pricing led to a year-over-year improvement in combined ratios?SCOR saw the biggest improvement among major European reinsurers, with its ratio falling 6.2 percent to 99.

Converium also saw its combined ratio improve to 97.3, while Munich Re's combined ratio dropped to 95.6. Among the large European reinsurers, Hannover Re was the only company whose combined ratio worsened, rising from 103.9 to 104.1 for the first quarter.

Further, major European reinsurers reported higher net income on a year-over-year basis. SCOR, for example, reported net profit of 32 million euros ($38.8 million), up 1 million euros (around $1.21 million) from one year ago, and Hannover Re posted 97 million euros ($117.7 million), up 26 million euros ($31.6 million) from one year earlier.

The biggest profit improvement was seen at Munich Re, whose first-quarter earning came in at 534 million euros ($648 million), in contrast to net loss of 557 million euros ($675.9 million) one year ago.

However, there are also a number of other not-so-positive factors to consider during 2004: Benfield cautioned that the sector's strong start to the year is still tempered by signs of emerging price competition and that the continuing threat of reserve strengthening could hurt results later in the year.