As 2003 draws to a close, the market is entering the final furlong in the 1/1/2004 renewals. At time of writing, the loss year to date has been pretty unspectacular, though memories of hurricanes Lothar, Martin and Anatol in 1999 preclude a definitive statement about the claims experience of 2003. Nevertheless, following November's National Association of Independent Insurers (NAII) meeting in Atlanta, Georgia, a straw poll of the market showed that many felt that conditions are still looking pretty good. "It was a very positive meeting," said Tim Carroll, President and CEO of GE Reinsurance Corp, the North American Broker Segment for GE ERC Global P&C Re. The tenor of the meeting was very much that clients are making money, reinsurers are making money, and brokers are "positive", he said. Unlike recent years, the 2003 NAII gathering had "no real burning issues," said Mr Carroll, though the subject of reinsurer security was definitely top of the agenda. Bill O'Donnell, President and CEO of ERC's Americas Direct business agreed that the gathering was "upbeat", adding that "this was the most stable of the discussions in the past two years." But "there were certainly concerns with reinsurance company ratings and financials," he commented. This is hardly surprising: recent weeks have seen Munich Re downgraded, while SCOR hit back at Fitch for pushing its rating down to 'BB+' from 'BBB'. In a statement, the irate French reinsurer said it was astonished and would "formally contest" Fitch's decision, which was made just two weeks before SCOR ratified a capital-raising exercise. Indeed, at the beginning of December, following an extraordinary general meeting, SCOR launched a ¤750m rights issue, at the same time saying it will exit from credit derivative exposures. Whether this will be sufficient to make up for SCOR's relatively low security ratings - there are murmurs in the market that it has dropped off some security lists - is yet to be seen.

While the traditional market continually attempts to fix its legacy issues, Alea sailed through its initial public offering (IPO) in November, closely followed by Aspen, the renamed Wellington Re. The investor appetite still seems hungry for good-looking re/insurance IPOs, and several Lloyd's-related re/insurance outfits have recently raised new funds to back their underwriting opportunities in 2004. The investment community is not, however, blind to underperforming businesses, and, among others, the Lloyd's operations of GoshawK and the Dex syndicate, backed by Swiss Re and the now-defunct Trenwick, are to shut up shop at the end of 2003.

Further afield, the appetite for re/insurance is being eyed hungrily by new territories looking at providing regional centres for the business. During the course of this year, Dubai has brought in legislation for a financial services centre, with the head of regulation being none other than the first ever Chief Executive of Lloyd's, Ian Hay Davison; while Bahrain is hotly competing to set up a Middle Eastern hub for the business. In January, the Bahrain Monetary Agency is supporting a conference looking at the recent trends in the Middle East insurance industry, including Takaful - Islamic insurance - and captive insurance.

As 2003 closes, re/insurance premiums are remaining fairly steady, though property appears to be 10% to 15% down on the rates achieved in the last renewal season. Liability business, as a generalisation, is holding up, though the capacity crunch in evidence earlier in the year is less of a problem. "There does seem sufficient capacity for demand right now," suggested Mr Carroll. But even though all seems relatively calm in the run-up to the renewals, it is probably worthwhile reflecting that ten years ago on 17 January the Northridge quake severely shook California, with economic losses touching $20bn, and insured losses $12.5bn, according to the Insurance Information Institute, following a relatively light claims year in 1993. Perhaps the industry would heed well the advice, 'expect the unexpected'.

By Sarah Goddard

Sarah Goddard is the editor of Global Reinsurance.

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