The dip in reinsurers' premiums in Q2 suggests the softening has begun

The rocketing premium rates that followed Hurricane Katrina were never expected to remain sky-high indefinitely. Certainly, a benign hurricane season in 2006 and the influx of new capacity into the industry set the scene for a softening market.

With many reinsurers' half-year results now out it is clear the softening has begun and prices have started to come down. Endurance, Markel and Max Capital all saw premiums take a tumble for the first six months of 2007.

Acknowledging the market pressures, Andy Davies, finance director at Markel International, said: "The reduction in gross written premiums reflects increased competition in virtually all lines of business. The solid underwriting performance reflects our disciplined approach to underwriting as the market softens."

Despite the tougher conditions, nearly all reinsurers have reported strong results. According to Ascot CEO Martin Reith this could be down to a greater focus on cycle management but he added that there was still evidence of "sloppy underwriting".

“If it's an active season the market will respond dramatically

One Bermuda player to see a growth in premiums was RenaissanceRe. Gross premiums written for the second quarter of 2007 were $845.9m, a $103.3m increase from the second quarter of 2006. CEO Neill Currie maintains this is all down to underwriting discipline. "Our focus is on underwriting as much attractive business as possible rather than trying to achieve premium volume targets," he said.

Whether prices continue to come down all hinges on the outcome of this year's hurricane season. "If it's an active season the market will respond dramatically," said Reith. "But I expect the market to come off at a dramatic pace if there is no activity."

With Hurricane Dean having already caused nervous jitters, the approriate phrase is "watch this space".