News Focus - Benfield issues update predicting future reinsurance capacity.

(From Reinsurance)

Benfield Group has issued an update on current market conditions and provisional comments on the trading period just ended.

According to Benfield, changes in the competitive landscape for insurance and reinsurance have provided unprecedented opportunities for the company to invest in its existing reinsurance intermediary business and in the development of an insurance intermediary business focused on the marine, energy and power sectors. In September 2005, this new venture was formally launched as Benfield Corporate Risk, and now also incorporates Benfield's other insurance broking interests.

These investments will inevitably have a short-term impact on profit and margin; the group had previously anticipated they would add a further GBP20m to expenses in 2005. As a result of increased spend on infrastructure, the cost base was projected to rise by approximately 6% over 2004. In addition, 2005 revenues were expected to be in line with 2004. The full-year 2005 projected trading result remains in line with that anticipated earlier in 2005.

Last year was the second successive year of record catastrophe losses, with market estimates for the combined insurance loss resulting from hurricanes Katrina, Wilma and Rita between $60bn and $80bn, with Hurricane Katrina in particular generating the largest-ever insured loss. At 2005/06 renewals, the previously downward trend in reinsurance rates generally stabilised, although competition was still evident for certain non-loss-affected business, particularly in Europe. There were substantial rate increases for loss-affected areas.

Last year's unprecedented catastrophe losses had an uneven impact on pricing and capacity at 2006 reinsurance renewals, according to a comprehensive report, Swings ...