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RenRe CEO Sees P/C Reinsurance Pricing Up During Next Three Years

Source: WSJ - Erik Holm

Posted on 03 Jun 2011

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RenaissanceRe Holdings Ltd.'s CEO Neil Currie is predicting that the price of property and catastrophe reinsurance will main favorable during the next 18 months to three years.

Currie, who co-founded RenaissanceRe in 1993, said that opportunities look inticing enough that RenaissanceRe, one of the largest insurers in Bermuda, may wait until 2012 to resume share buybacks it halted earlier this year.

"We want to see if we can deploy our capital first," Currie said at a presentation to analysts and investors in New York on Thursday.

The Atlantic hurricane season began this week, and reinsurers traditionally sell a substantial portion of their annual coverage on July 1 and Jan. 1. Catastrophe reinsurance rates across the globe have climbed significantly in recent months as powerful earthquakes rocked New Zealand and Japan, storms struck Australia and tornados hit the U.S. In addition, new hurricane models have increased estimates for insured losses in many parts of the U.S.

"Let's see at 1/1," Currie said, in reference to the Jan. 1 renewal date. "While we are always open to buying our shares back, we will take a hiatus for a little while. But we've got a $500 million authorization and over the coming years I am certain we will continue to buy shares back."

The prediction of a firm reinsurance market stands in contrast to what happened to prices in the aftermath of Hurricane Katrina and other powerful storms that struck the U.S. in 2005. Insured losses set records that year, and the price of catastrophe coverage initially skyrocketed. But new entrants hoping to grab some market share quickly drove rates down again.

Currie said there were few signs of new entrants this time around, even though rates in both the U.S. and overseas have risen.

"Bad stuff is happening. Reinsurers--some are fearful. Insurance companies that need to buy coverage are fearful," Currie said. "When you look at the fear...I don't see a big movement of that capacity into our area."

Still, he said the current market "dislocation" ranked as only the fourth-largest in the past three decades, and was unlikely to force rates higher across the property-casualty market. After the terrorist attacks of Sept. 11, 2001, prices rose in many lines of coverage.

"I don't think it's going to be that widespread," Currie said. "It's not going to creep into other lines of business in and of itself. It's not going to change the casualty marketplace...but I think it bodes well for attractive returns for the coming years."