Reinsurance prices expected to remain firm through July: Aon Benfield

Global reinsurance prices firmed for Jan. 1, 2009 renewals and are expected to remain that way for April and July 2009 renewals, according to the January 2009 Reinsurance Market Outlook issued by Aon Benfield. Aon Benfield expects the reinsurance renewal market in April and July 2009 will be similar to the January market, assuming only limited additional turbulence in the financial markets and no significant reinsured catastrophe losses, the company notes. U.S. hurricane and earthquake reinsurance pricing will increase modestly, and pricing of other global natural perils will remain firm, similar to the January market. The credit crisis and the severity of hurricanes in 2008 combined to shrink the capital base of many reinsurers.It is estimated reinsurers will be entering 2009 with 15-20% less economic capital than in 2008, Aon Benfield notes. “Reinsurers have demonstrated prudent capital management during the recent financial crisis, particularly when measured against other financial institutions,” Bryon Ehrhart, CEO of Aon Benfield Analytics, said in a press release. “Despite significant investment-related losses, equity capital remains at appropriate levels to support underwriting risk for reinsurers.”Moreover, reinsurers have very low debt leverage and comparatively very low total asset leverage, relative to banks [that] have struggled greatly during this financial crisis.”