Comment - Special factors impacting the reinsurance market in 2005.

(From Reinsurance)

Byline: Edmund Megna, vice-chairman of Guy Carpenter & Company, Inc.

The reinsurance market at 1 January, 2005 renewals could, perhaps, best be described as moderately soft, with the emphasis on 'moderately'.

For most lines of business, renewal rates were flat or down, but with decreases mainly restricted to single digits.

Similarly, where there were increases, they also tended to be in the single-digit range.

Looking ahead, we would anticipate the mild softening to continue in 2005 for the major renewals dates of 1 April, 1 June, and 1 July, barring a few special factors. So let's look at some of the special factors.

Our first concern arises from the extraordinary hurricane and typhoon seasons of 2004, where there are fears in the market that reported losses may rise. Some analysts have suggested that losses from the hurricanes hitting the southeast of the United States may be understated by as much as 50 percent. If this expectation is true, the market for catastrophe property could probably firm. We would not expect a hard market as such, but one where rates renewing as expiring would be more the rule than at 1 January renewals. We will be carefully monitoring the results of reinsurers for the fourth quarter 2004 and the first quarter 2005 to see how their hurricane and typhoon losses develop.