PROP-CAT RATES UP 15% AT FLORIDA JUNE RENEWALS

Property-catastrophe rates were up 15% at the mainly Florida-focused June 1 renewals, compared with a decline of 15% a year ago and less than the 20% hike that some had expected, according to a report from reinsurance broker Guy Carpenter. Capacity was said to have been more limited than in recent years, but was still sufficient for renewals to be completed. Guy Carpenter said that “the intricacies of the Florida market” meant that the headline increase of 15% was in line with the increase in rates at the April 1 US national reinsurer renewals. “Constraints on capital have pushed risk-transfer pricing higher, but shortages were not so severe that rates spiked as they did in 2006”. The demand for private reinsurance increased by between 5% and 10% as a result of the $2bn cutback in capacity at the Florida Hurricane Catastrophe Fund’s Temporary Increase in Coverage Limits. Firm Order Terms were on average 95% of average quotes for both higher and lower layers. Guy Carpenter noted that the increases remained “far below” those experienced in 2006, the year after Katrina. Historically, just over half the $20bn to $25bn capacity utilized in Florida is allocated to Bermuda. Of the remainder, 18% came from the UK, 19% from other capital sources, and 10% alternative risk transfer to hedge funds. Guy Carpenter said that traditional capacity fell by 10% this year. However, the broker concluded that the fact that the rate increases were consistent with the April renewals indicated that “capacity conditions have not worsened through 2009” and that “the market has stabilized to some degree”. Looking forward, Guy Carpenter said that local results for the July 1 renewals “are likely to involved modest adjustments on the prevailing global cost of transferring risk”.