News Analysis - Reinsurance renewals weather storms.

(From Reinsurance)

Byline: Marc Jones.

The last few months of 2004 saw a series of storms hit the US and Japan. Four hurricanes wreaked havoc on Florida and the southern US, as Charley, Frances, Ivan and Jeanne killed 117 people, destroyed 2,500 homes and caused more than $22bn in damage. Japan was hit by 10 major storms, including typhoon-class events, which inflicted more than a trillion yen in damage.

Despite the damage, the effects on the reinsurance market do not appear to be that serious, according to several reports on the state of play in the market.

Looking back at 2004 and the effects of the hurricane season, Aon has announced that the main effect of the storms was to lessen the scale of the reductions that would have applied as the market softened, putting the brakes on the downward trend that was evident in the mid-season renewals.

Losses comfortably absorbed

Charlie Cantlay, deputy chairman of Aon's reinsurance division, said that the low impact is partly due to higher client retentions and partly due to the work that companies have been doing to rebuild their balance sheets. He added: "The fact that an unprecedented frequency of losses has been absorbed by the reinsurance industry with relative comfort is testimony to its strength, the significant building of reserves that has taken place over the last few years of profit, and the robustness of capital allocation methodology driven by a highly technical and modelled underwriting approach."