“These top line reductions are attributable to more disciplined underwriting, reduced capacity due to stricter capital requirements by rating agencies,” and the transfer of business to special purpose reinsurers known as sidecars, said Benfield analyst Christopher Klein.

Sidecars, generally backed by hedge funds or institutional investors, typically comprise a newly-created licensed reinsurance company that assumes risk, collects premiums from and pays claim losses to the ceding insurer via a quota-share reinsurance agreement.

Benfield said 2005 start-up reinsurers may have had a disappointing Jan. 1 renewal season, which looks to be reversed this year. “But the enforcement of reduced underwriting gearing suggests their contributions to capacity may be modest,” the report said.

Some companies may have been holding back capacity in anticipation of a tight June and July renewal season, the report noted.

The 2005 hurricane losses prompted a wholesale reevaluation of catastrophe underwriting. “Reinsurers scrutinized peak exposures, which has led to a broad-based tightening of capacity,” the report said. “Rates in cat-affected lines have hardened and industry leaders cite scope for further price increases.”

Many companies did not renew contracts deemed unprofitable, despite sometimes vastly increased rate levels and more restrictive terms and conditions, the report said.

The Bermuda companies' premium decline was broad-based rather than caused by significant drops by one or two influential companies. Platinum reported a 35 percent reduction in gross premium written, which was primarily attributable to the termination of two finite quota share contracts.

But not all carriers decreased premium.

Arch reported 19 percent growth, asserting that its underwriting discipline had enabled the company to take advantage of market opportunities. Renaissance Re grew its catastrophe premiums by 23 percent, but total premium growth was only 8 percent due to diminishing opportunities in specialty lines.