Pressure remains strong for reinsurance rate increases for the marine, energy, U.S. property and retrocession markets as of the April 1 renewal season, according to London-based reinsurer Willis Re.
"Outside of these key distress areas, however, as with Jan. 1 renewals, market capacity remains adequate with muted price movements and strong balance sheets enabling primary companies to retain more risk," the company said in a report.
Willis said it sees "A Tale of Two Markets" for reinsurance buyers as the June and July seasons approach.
In addition, the report found that upward pricing pressure has been bolstered by some reinsurers holding back their remaining limited capacity for the July 1 renewal season.
Other key report findings:
oDynamics of the industry remain delicately poised, with the global reinsurance market one major loss away from significant price hardening across the board.
oThe appetite of investors to supply new capital to the reinsurance market appears sated after a frenzied fourth quarter and rising interest rates.
oHedge fund interest in catastrophe risk remains high, though some capacity in distressed areas is being held in the hope of extracting better terms later in the year.
oRevised methodology by rating agencies and vendor catastrophe models in the wake of the 2005 hurricane losses will have an impact, particularly for U.S. exposures.
oStandard & Poor's introduction of exposure as opposed to premium-based capital loadings will impact capacity.
Availability and affordability of capacity in the traditional retrocession market "has forced insurers to think differently about managing gross aggregates," the report stated.
Insurers and reinsurers should also expect the rating agencies to monitor more closely the utilization and output of catastrophe models, the report stated.
As for Bermuda, the report said any infusion of new capital will come in the form of investment in existing companies, but that such an event will come following an assessment of the 2006 season.
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