Continued softening expected in property catastrophe reinsurance

Traditional property catastrophe reinsurance program pricing is anticipated to continue softening during mid-year renewals, according to Aon Re Global analysis. Price reductions will be a higher priority for cedents, while terms and conditions are expected to improve, Aon Corporation notes in a release. But the underlying fundamentals that drove the softening of price and terms and conditions at Jan. 1, 2008 are expected to continue though the June and July renewal season, Aon reports. “Supply continues to grow at a faster rate than that of cedent demand, which implies continued softening,” said Bryon Ehrhart, the president and CEO of Aon Re Services.Aon Re Global’s market expectations for the June 1 and July 1 renewals for Canada include a -7.5% to -12.5% rate on line change, a capacity change of 10% to 15% and a stable retention change. At current pricing levels, and given the current capitalization of the property and casualty reinsurance market, Aon Re Global estimates it would require a ground-up property catastrophe occurrence loss in the range of between US$30 billion and US$50 billion to change the direction of property catastrophe reinsurance rates, terms and conditions.