The recent renewals figures issued by the top reinsurance brokers, which indicate a 5%-10% decline in rates, will clearly be a disappointment for reinsurers.

While they can’t have been expecting an across the board increase, they are concrete proof of what many had feared – the soft market, if it is not upon us already, is approaching fast.

The flooding in Australia will also have brought little cheer. Judging by the big Australian insurers’ initial estimates, they have been successful in transferring the bulk of the losses onto the reinsurance industry. As well as hitting earnings, which are also being eroded by soft prices, the current insured loss estimates from AIR of between A$3bn and A$6bn indicate that this event will not harden the market. As one broker said to me recently, the floods might make Suncorp’s reinsurance more expensive, but it is unlikely to have a global effect.

However, perhaps this is cause for at least some celebration. The fact that the industry can absorb such losses without flinching, and without raising rates across the board, indicates that it is getting something right. Of course, this means that executives cannot bank on sudden price increases filling their coffers, but a less volatile, more predictable reinsurance industry can only be good news, not only for the companies themselves, but also shareholders and clients.

All the industry has to do now is make sure prices do not slide too far.