(Brokers have told FIC that catastrophe reinsurance premiums declined 10 to 20 percent in 2008 and 2007 after a more than 75 percent spike in 2006. This report in the Financial Times of London is a sign of further declines for 2009 unless there are major losses in the final weeks of the 2008 hurricane season.)

Financial Times  London
Willis gloom on reinsurance pricing

By Andrea Felsted in London
Published: September 8 2008

It would take $50bn-$100bn of insured catastrophe losses to stem the slide in prices in many areas of the insurance and reinsurance markets, Willis, the broker, has warned.

Without heavy catastrophe losses, it could be the end of 2009 or into 010 before the markets stabilises, said Joe Plumeri, chairman and the chief executive.

Mr Plumeri's comments will make grim reading for reinsurers gathering this week for their annual gettogether in Monte Carlo.

The meetings over the next few days in the ornate salons of the Riviera  kick off price negotiations on policies set to be renewed in January.

"All the signs are that I don't think the soft market is going to last a long long time . . . but it does not seem to be something that is going to end in a few months," Mr Plumeri said in an interview with the Financial Times.

"It feels more like the last half of next year or 2010."

Insurers' and reinsurers' balance sheets have been bolstered by three years of relatively strong premiums, together with a dearth of big catastrophe losses. However premium rates are falling in many areas while claims are rising.

Mr Plumeri said balance sheets were still strong, unlike in the period before the September 11, 2001 terrorist attacks, when they had been depleted.

But profits from writing policies were now under pressure, while investment income was being eroded by the turmoil in global financial markets.

Catastrophe losses in the $50bn-$100bn range could "accelerate" market stabilization, Mr Plumeri said.

However, he said even this level of catastrophe losses would be unlikely to transform the insurance and reinsurance markets overnight.

"If you had a loss like that, it does not change things tomorrow. It takes a while for that to flow through the system."

Mr Plumeri said that insurers and reinsurers faced a myriad of risks,  such as those from more extreme weather, terrorism and technology.

"You would think that with all of the risk that is apparent around us,  that pricing would be more cautious, but it is not," he said.

The comments come amid the most active hurricane season for three years.

Hurricane Gustav hit the US Gulf Coast last week, but insurers and reinsurers hope to escape significant claims after it weakened and made landfall in a less populous area.