10-15% increase in catastrophe renewal

Catastrophe renewal pricing covering risks in Florida increased by between 10% and 15% as of June 1, according to Aon Benfield’s Reinsurance Market Update and Outlook Report.
This is at the middle-to-lower end of the ranges estimated in the Apr.1 report.
The less severe increases occurred for a few reasons, according to the report:
• the Florida Hurricane Catastrophe Fund (FHCF) dramatically increased estimates of bonding capacity, due to the belief that municipal bond markets had substantially improved; it may now be able to fund all of its projected mandatory and optional capacity;
• insurers’ continued investment-related challenges in 2009 Q1 caused property catastrophe risk reduction strategies to be prioritized above paying substantially higher prices for reinsurance coverage; and
• reinsurer capacity was generally adequate for the demand that did come to the market.
Year-on-year rate increases are estimated to be approximately 10% to 15%, according to the report.
Reinsurer equity decreased another 3% in 2009 Q1, which is a rate of decline similar to insurers.
Reinsurers have maintained the core capital necessary to renew substantially all of their capacity, but there are exceptions, according to the report. The exceptions include:
• reinsurers that had substantially larger investment or debt leverage; 
• reinsurers that rely more substantially on retrocessions as a source of capacity.
“Few new sources of capital have emerged thus far in 2009, but the reopening of the catastrophe bond market and limited signs of investor interest in sidecars and industry loss warranties are positive signs for the market,” according to the report. “Capacity for substantial new catastrophe programs remains limited.”