Premium rates for non-catastrophe exposed classes of property/casualty insurance and reinsurance worldwide could decrease more rapidly if the 2006 Atlantic hurricane season is benign.
Stephen Catlin, the chief executive of Catlin Group, predicted the decline, but warned that it was far too early to categorise the 2006 hurricane season as mild.
“There is currently an amount of euphoria about the current hurricane season,” he said during a lecture at Lloyd's of London.
“While this euphoria grows more appropriate as the days pass, we must remember that the hurricane season does not end until 30 November.”
Even if there are few significant US hurricane losses during 2006, rates for catastrophe exposed classes of business, such as property catastrophe reinsurance, are not likely to decrease because the demand for this type of coverage still exceeds the supply, Stephen Catlin said.
Premium rates for these classes of insurance and reinsurance have risen sharply since the record series of hurricanes in 2005.
If the 2006 hurricane season resembles the 2004 season, during which there were several large hurricanes but no single ‘mega-catastrophe' like Hurricane Katrina, rates for catastrophe exposed classes of business would likely increase further, Stephen Catlin said.
However, if the current hurricane season resembles the 2005 season – during which Hurricanes Katrina, Rita and Wilma and other storms caused insured damage exceeding US$60 billion – there could be a severe shortage of capacity for catastrophe exposed classes of business.
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