However, in the United Kingdom, he noted, due to higher reinsurance attachment points, "insurers' insurance programs didn't tend to attach, so we had surplus capacity last year because of an absence of losses hitting reinsurance programs--not because of an absence of losses."

He said that Guy Carpenter's recently released report--"Near Misses, Plentiful Reminders"--was aptly named because of the number of major events last year that didn't impact reinsurance programs as seriously as might have been expected. Among them were:

o At least four earthquakes higher than seven on the Richter scale.

o Two Category 5 hurricanes that made landfall (which he called "without precedent").

o A near miss with an earthquake in Japan.

o Storms in Europe and Australia.

o Wildfires in California, Canada and Greece.

Reinsurers and insurers, noted Mr. Klein, have had two years of good profits, which has created a squeeze from both sides.

"You've got reinsurance buyers who want reductions because they haven't had any losses, so they feel that they should be getting a discount," he said. "And because the losses have not been hitting the reinsurers, they have been making profits, which are swelling their balance sheets, increasing their capitalization."

Mr. Klein observed that since "capital is the raw material of the reinsurance industry" and "supply exceeds demand, prices are being squeezed--and insurers have been having good results as well."

He said overall, primary insurers had a very good reinsurance renewal season, reporting a combination of lower rates along with better terms and conditions. Price was their main concern, but as for their ability to tap capacity, he cited "no real problems."

There was, however, a tendency for buyers to hold out, "which is not an uncommon symptom of a soft market." He explained that while buyers didn't put off renewals, they went in "early for a quote and waited before putting in for the firm offer" in hopes of getting a few percentage points off the opening quotation.

Reinsurance underwriters, meanwhile, are trying to hold their own, "and we have seen a lot of capital management taking place in the last 12 months," he said.

Reinsurers have been returning excess capital to investors in the form of stock buybacks and special increased dividends, or substituting equity capital with debt--which is cheaper and lowers the average cost of capital, he explained.

The big macroeconomic event last year was the collapse of the subprime mortgage market, but "we do not think the impact...has been significant from a reinsurer point of view," he said. "We do not think the reinsurance losses are going to be massive."

In the directors and officers sector, he said Guy Carpenter estimates losses of about $3 billion so far, adding that there may be further developments next year.

In its annual report, Willis Re observed that while nearly all reinsurance sectors are showing signs of softening, the intensity of competition varies by class, line and region.

Certain segments (such as marine) are demonstrating only modest softening, while others (such as U.S. property) are posting more precipitous declines, following bigger hikes in the wake of 2004 and 2005 hurricane losses.

One interesting development, Willis noted, is that disparities have developed among the major reinsurance hubs. For example, Bermuda has taken a more aggressive posture than London on property business for many regions, including the United States, the broker reported.

Willis also observed that when combined with the ongoing gap between insurance and reinsurance pricing trends, this lack of consistency across markets and classes has fostered a "late" renewal season as insurers try to reconcile reinsurer offerings with their own financial objectives.

Willis reported:

o Rate reductions in almost every line of business.

o Record profits and the quest for diversification have led to severe competition among reinsurers.

o The subprime mortgage crisis has had a limited effect on reinsurers' appetite.

o Capital market interest in supporting insurance risks remains unabated, with some $6.4 billion of catastrophe bonds being issued this year.

Dave Cameron, executive vice president for Benfield in Minneapolis, observed that in the United States, risk-adjusted pricing is off about 10 percent.

"This varies dramatically by client," he said, explaining that an account with increased exposures may see a relative softening "but wind up paying more premium." If exposures are decreasing, "you're getting credit for that--and you may be getting a little more credit beyond your actual exposure decreases."

As for underwriting discipline, he said, "if things were 10 percent more than adequate last year, and now you're writing at 10 percent off on a risk-adjusted basis, then you're still doing the right thing as an underwriter by your shareholders."

Compared to 2007, according to Mr. Cameron, it appears that 2008 will be less attractive to reinsurers, "but in theory, the metrics for analyzing the returns they're getting on the business are still adequate."

For example, he added, "we haven't seen the market falling 50 percent anywhere, or where there are silly things going on, so from that perspective I would say discipline is holding."

As for the troubled Florida catastrophe market--with extra capacity provided by state legislation authorizing the Florida Hurricane Catastrophe Fund to sell reinsurance to local carriers at below-market rates--Mr. Cameron noted: "There is not a lot of Florida-specific change, and the wild card in Florida is still what the legislature will do with the cat fund."

William H. Eyre Jr., principal of Towers Perrin and managing director for reinsurance, observed that he is "seeing orders given by clients for prices below 2007, across all lines," with the price decreases varying by type of business and individual company, depending on experience and exposures.

Mr. Eyre said despite the price-cutting for Jan. 1 renewals, there remains a good degree of discipline because reinsurers have vowed not to chase business, explaining that they need to maintain certain capital requirements for their catastrophe business to satisfy rating agencies.

"We don't see pricing decreases from the reinsurers at as sharp a decline as what's happening in the property and casualty commercial lines business," he said.

Part of the reason for that disparity, he explained, is that reinsurers are operating in an environment with fewer carriers than in past years, "and many have publicly stated they are planning on negative growth for 2008. We have not heard of as many p-c commercial lines carriers saying that about their top line."

When it comes to terms and conditions, there has probably been some modification--such as higher ceding commissions on proportional business and some modification on terrorism risks--"but it's on a case-by-case basis," he added, and not automatic, across-the-board improvements.

Steve Skowronski, a managing director of insurance and reinsurance services for SMART Business Advisory and Consulting LLC, based in Devon, Pa., whose clients include both reinsurers and primary carriers, observed continued softening in pricing as well as a loosening of terms and conditions for both the primary and reinsurance markets--although at different paces.

He also said a quiet hurricane season for 2007 continues to put pressure on pricing, terms and conditions in buyers' favor.

One exception to price softening, he said, has been the U.S. property-catastrophe reinsurance market, where price increases have been substantial (although less than anticipated) in some pockets, due to a shortage of retrocessional capacity.

Mr. Skowronski noted continued increases in competition and capacity overall, with capacity from reinsurers more available since most primary companies have been buying less reinsurance.

As a result, he said, there is less premium flowing to the reinsurance markets and more reinsurers competing for a smaller pie of more volatile business. "This will lead to a softening reinsurance market and potentially increased merger-and-acquisition activity--which, by the way, we are currently seeing an up-tick in," he added.

He also observed that reinsurance-like capital markets--once allies of reinsurers--are increasingly becoming competitors, in a trend expected to continue beyond the Jan. 1, 2008 renewal season.