Property catastrophe rates increased for midyear renewals, but not as much as reinsurers had hoped and insurers had feared, brokers and reinsurers say.

Industry experts say reinsurance rates generally increased in the 10% to 20% range. Reinsurers had hoped for higher increases, but were thwarted in part by primary insurers' push-back amid adequate capacity.

Meanwhile, the casualty market remains relatively flat, observers say.

``I think folks expected more hardening at June 1 and July 1 than what materialized,'' said William H. Eyre Jr., managing director and chief executive officer of Philadelphia-based Towers Perrin Reinsurance. ``But overall, property prices are moving up and casualty reinsurance appears poised to be headed that way in 2010,'' although ``on a fairly moderate basis.''

``Frankly, I'm surprised by it because it just seemed like capacity would be tighter, everybody would be pushing for more rates based on reduced investment income and everything else, and I haven't seen it,'' said Rod Fox, CEO of intermediary TigerRisk Partners L.L.C. in Greenwich, Conn.

Joseph M. Fedor, executive vp of intermediary U.S. Re Corp. in New York, said midyear renewal rates were not as high as anticipated earlier because of ``reluctance on the part of buyers to pay such increases, and also (a move) to not purchase the level of limits they might have purchased in the past, leaving a surplus of capacity available, which then acted as a competitive factor to reduce prices.''

``The financial markets steadied somewhat since the autumn'' and balance sheets have stabilized somewhat as well, said Chris Klein, head of the business intelligence group at Guy Carpenter L.L.C. in London.

Neither the Tallahassee-based Florida Hurricane Catastrophe Fund nor the Austin-based Texas Wind Insurance Assn. renewed their reinsurance programs. This ``dampened the hardening that might otherwise have occurred in the marketplace,'' said Bryon G. Ehrhart, chairman of Investment Banking Group and CEO of Aon Benfield Analytics at Aon Benfield in Chicago.

``But, in general, the market has, thankfully, been functional,'' Mr. Ehrhart said. ``Reinsurers maintained the capital necessary to maintain an orderly market.''

''There's a continuing disconnect between reinsurance and primary companies, and what is acceptable pricing for catastrophe business,'' said Richard DiClemente, president and CEO of New York-based THB Intermediaries Inc.

There is ``definitely push-back from the primary side on reinsurance pricing and, because of the competitive market...they will continue to write business even if they can't match up their pricing with the pricing of reinsurance. They'll simply retain the business if they have to,'' Mr. DiClemente said.

Eric Brosius, senior vp and manager of reinsurance for Liberty Mutual Insurance Co. in Boston, said, ``If you're looking at the actual, core reinsurance market, it seems very much similar to what it was'' during the Jan. 1 renewals.

``It's in some sense a boring season that nevertheless has some tension in it because of this primary and reinsurance gap,'' Mr. Brosius said.

James H. Veghte, CEO of XL Reinsurance America Inc. in Stamford, Conn., said, ``We've seen risk adjustment improvements on U.S. business of between 10% and 15%. Our hope going in'' was property catastrophe reinsurance rate hikes of 15% to 20%.

Towers Perrin's Mr. Eyre said rates for property catastrophe reinsurance increased 5% to 15% for regional business and 10% to 15% for ``superregional'' and national firms, all of which have been subject to each company's loss experience.

Paddy Jago, New York-based CEO of Willis Re Inc., the reinsurance unit of Willis Group Holdings Ltd., said June renewals in particular had exposure predominantly in the Southeast. ``Whereas there was an uptick in rates for those renewals, the uptick wasn't as sharp'' as had been predicted, he said.

``I would suggest it was between 15% and 25% and many of the companies purchasing looked to purchase the minimum amount necessary to satisfy the regulatory authorities,'' Mr. Jago said. ``This in many cases meant purchasing less coverage than they had previously.''

Observers say capacity is adequate and the reduction in catastrophe reinsurance business written by Berkshire Hathaway Inc. (BI, June 29) has not had a significant effect on the market.

``There seemed to be plenty of capacity for everything that needed to get down,'' said John Berger, CEO of Hamilton, Bermuda-based Harbor Point Ltd. Midyear reinsurance renewals were ``surprisingly orderly,'' he said.

However, Mr. Veghte said, ``There could be some strain on individual placements with heavy commercial content due to model uncertainties and so forth.'' A significant increase in insurance-linked security placements has helped manage risks, he said.

For noncatastrophe property lines, rates generally were stable. ``Where loss experience on a particular portfolio was not positive, rate increases were experienced,'' said Pina Albo, president of the reinsurance group at Munich Reinsurance America Inc.

Casualty ``remains highly competitive,'' Mr. DiClemente said. ``We are still seeing renewal pricing pretty much flat to maybe a 5% increase, with even an occasional low single-digit decline,'' said Mr. Eyre.


``We're seeing flat to reductions in the low single-digit range with the exception, obviously, of (directors and officers) business,'' Mr. Veghte said. ``The reinsurance market, I think, is more disciplined than the insurance market. Nevertheless, if you think about the nature of casualty placements, there is an awful lot of quota-share placements,'' which makes reinsurance rates ``quite sensitive'' to primary rates.

There was ``continued pressure on casualty lines, but rates are generally holding and, in fact, increasing where loss experience on a portfolio warrants that,'' Ms. Albo said.

In addition, ``There seems to be an increased level of interest again in alternative market capital provisions,'' said Hugo Crawley, chairman of London-based BMS Intermediaries Ltd. ``There is more activity in terms of talk than there was in the first quarter or last quarter of last year,'' he said. ``But in terms of execution, there's still not very much.''

The capital markets remain cautious but are ``thawing,'' said Guy Carpenter's Mr. Klein.