Reinsurance rates on line for personal lines, standard commercial lines and complex commercial lines are likely to be flat to lower during mid-year renewals of property catastrophe reinsurance programs, according to an Aon Re Global analysis.
Additionally, Aon Re expects a slight excess of capacity relative to likely reduced demand for peak Florida capacity.
Aon Re expects US rates to remain flat or drop by up to 20% while European rates may fall by 5%. The UK rates, according to the company, will remain flat.
The drivers at play in the property catastrophe reinsurance market leading up to the June 1 and July 1 renewals include: a nearly loss free reinsurance year in 2006; restoration of reinsurers' capital bases; significant participation in the catastrophe reinsurance business from non-traditional sources, such as hedge funds, high net worth individuals, institutional money managers and the asset backed securities market; and improving confidence from reinsurers in the revised catastrophe reinsurance models.
"Four months ahead of the 1 January 2007 renewals, Aon Re Global correctly predicted the return of a functioning worldwide property catastrophe reinsurance marketplace," said Bryon Ehrhart, president and chief executive officer of Aon Re Services. "In such a marketplace, cedents would generally find sufficient capacity at terms and conditions that represented accretive underwriting capital for their organisations."
