* Reinsurance rates for U.S. property seen up 5-10 percent
* Wider industry price rise not expected yet
* Industry needs more losses to boost prices -rating agency
By Sarah Mortimer and Jonathan Gould
London, May 19 Reinsurance rates are set to rise
up to 10 percent for U.S. property contract renewals, but price
increases are not expected across the broader reinsurance
industry for now.
At the start of the year brokers and analysts estimated it
would take up to $50 billion in catastrophe losses to halt
years' of declining reinsurance prices and push prices back up
to more profitable levels for reinsurers.
The industry has reached that mark. Losses from the
tornadoes that swept through the southern U.S. states will add
to tens of billions of dollars in insurance claims arising from
a string of natural disasters over the first three months of the
year, including the Feb.3 cyclone in Australia, the earthquake
in New Zealand on Feb.22, and the March 11 quake and tsunami in
Prices are expected to increase in U.S. property casualty
lines by 5-10 percent, but not across the broader reinsurance
"It would take another $30 billion of losses to wipe out all
the excess capacity and contribute to a broader market turn,"
said Robert Derose, vice president of reinsurance ratings at
rating agency A.M. Best.
The 2010-2011 losses are widely expected to be a significant
hit to industry earnings, rather its capital base. But a further
major loss could bring the market closer to the elusive "hard"
reinsurance market, when reinsurers can charge more for the risk
cover they offer their insurance company clients.
"A turn of the market is getting closer," said James
Vickers, chairman of Willis Re International and Specialty.
But it would take another big event or more accumulated
losses to take it there.
"The reinsurance industry was strongly capitalized in 2010,
but some of that margin has been eroded early," said Gregory
Dickerson, director at Fitch.
Reinsurers typically face their biggest damage claims in the
second half of the year, during the North Atlantic hurricane
season, which runs from June - November.
Any big payout would make it easier for reinsurers to
justify higher prices for insuring against risks.
U.S. HURRICANE MODEL CHANGE
Recent changes to a U.S. hurricane model from risk assessor
RMS - used by insurers and reinsurers to estimate their
exposures to natural disasters - may help to boost prices.
The model changes has increased loss estimates for the
amount of damage an Atlantic hurricane can cause for inland
states increase significantly by up to 90 percent.
"We're getting closer to a trigger point," said Brian
Schneider, senior director at Fitch.
"Each individual event is not enough to move the market, but
if you factor in the aggregation of all the different
catastrophe events, the RMS model changes, as well as underlying
issues with low investment yields or reserves running low, and
there is the momentum for a harder market."
(Editing by Louise Heavens)