If not for the insured losses incurred overwhelmingly by Hurricanes Katrina, Rita and Wilma, the primary insurance industry would have reported an underwriting gain of $37.7 billion for 2005, Guy Carpenter said.

A combination of successful risk transfer to the reinsurance market and high profitability enabled the insurance industry to sustain the largest loss in its history, Guy Carpenter said, with 2004 and 2005 marking the first years since 1978 that the U.S. insurance industry as a whole has been able to post an underwriting profit.

“On an industrywide basis, it's fair to say the catastrophes of 2005 were an earnings event, not a capital event,” said Sean Mooney, Guy Carpenter's chief economist, in a statement.

Mr. Mooney added: “It is unlikely that we will see a hard market across all primary lines of business, which one would normally expect to follow losses of this magnitude. As a result, many primary insurers have not been inclined to accept rate increases across the board for reinsurance protection, since it would be difficult to pass these costs onto insureds.”

Among the report's findings:

o Property: The storms of 2004 and 2005 had a major effect on property reinsurance renewals but did not cause a capacity shortage. The impact was mostly indirect, as key market players–insurers, reinsurers, modelers, rating agencies and regulators–recognized that the existing viewpoint grossly underestimated both the frequency and severity of North Atlantic hurricanes.

Reinsurers pressed for–and, in some cases, received–substantial rate increases on property lines at Jan. 1 renewals.

o Casualty: Casualty renewals saw no pronounced effect from the storms on rates or capacity. Reinsurers tended to approach various casualty lines based on rate and claims trends particular to each line. In some instances, such as excess casualty, reinsurers sought to raise rates on the basis of the cost of the increased capital that they now need to protect their security ratings.

o U.S. Marine and Offshore Energy: The 2005 storms continued to put great pressure on the marine and offshore energy reinsurance markets. Guy Carpenter said several companies have already exited this class of business. Those that remain will likely respond with a combination of price increases and a focus on retention levels.

Copies of the 30-page report are available for download at www.guycarp.com. Printed copies can be obtained by contacting Guy Carpenter at [email protected].