Despite the fact that Mr. Dillon remains optimistic that reinsurance coverage will be available at a reasonable cost, he said he is already in the market for the 2005 season, even though his treaties do not expire until April 1 and July 1. “We are afraid that catastrophe [coverage] could become an issue and we want to get ours locked up,” he noted.

Todd Hess, chief risk officer for the Swiss Re Underwriters Agency in Calabasas, Calif., sees the reinsurance industry at a crossroads. The hard and soft pricing cycles of the past “have been a function of marketshare mentality trumping analytical indications,” he said.

On the property-catastrophe side, while having four major hurricanes hit Florida in two months might seem unusual, from a modeling perspective they were “not unimaginable,” he noted. “But on the casualty side, the results come out many years later, and in the ensuing time a whole lot of business has been written.”

He noted that the forced exit of Zurich-based Converium from the North American market resulted in forced reserve increases for casualty lines of business.

James Farmer, vice president of operations for Bloomington, Ill.-based State Farm, compared this year's catastrophe season to the one 12 years ago when, he said, losses may have been roughly the same in dollars, but were nowhere near the same in overall impact. “If you remember back in 1992 in the aftermath of [Hurricane] Andrew, it took a long time for capital to flow back in,” Mr. Farmer recalled. “There were some Bermuda start-ups. London was out of play for awhile. It happened, but it did not happen very quickly.”

After the Sept. 11 terrorist attacks, however, capital flowed into the industry much quicker and almost matched the capacity that was lost.

As for the 2004 hurricane season, Mr. Farmer said any softening in the property-catastrophe market will stop following Hurricanes Charley, Frances, Ivan and Jeanne, “but there will not be this huge increased reaction we had post-Andrew, so I am optimistic.”

Reproduced from National Underwriter Edition, October 28, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.