Renewal Round-up - Seasonal Fluctuation - Why this hyped renewal season is such an anticlimax.

(From Reinsurance)

Fear and greed are sometimes said to be the main drivers of the reinsurance underwriting cycle and the 2006 renewal was widely expected to bring out the worst in the market - on the first count at least.

Following the worst-ever year for catastrophes, many feared that capacity shortages and damaged balance sheets would combine to drive up reinsurance prices all over the world. No-one would escape the Katrina effect.

Reinsurance costs were meant to skyrocket across the board as reinsurers scrambled to repair their wind-blown balance sheets. At industry meetings from Monte Carlo to Latin America, all the signs were that primary insurers were in for swingeing reinsurance price increases - whether or not the buyer's business was exposed to US windstorms.

However, it didn't happen. For many cedants, the most hyped renewal since 9/11 was something of an anticlimax.

Of course, for certain reinsurance buyers, 1 January 2006 lived up to their worst fears. For some, it was the latest renewal on record, and it was also the most difficult - but only for those primary insurers looking to reinsure US wind-exposed property contracts, Gulf of Mexico (GoM) energy exposures and an extremely difficult retrocession market.

Outside this critical zone, the renewal season was largely stable and uneventful, with plenty of available capacity. Rate rises were flat-to-single-digit price increases across the property/casualty spectrum.