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No End in Sight for Soft Market

Continuing fierce price competition means the soft reinsurance market is here to stay, predicts Joe Fedor. Executive Vice President of U.S. RE.

"Today's market is extremely competitive in all lines," Mr. Fedor said. "The current situation is fueled by excess capacity in the United Kingdom, Europe, the United States, and Bermuda," he explained.

"With a few regional or local exceptions, reinsurers are willing to write more business for primary insurers to gain premium volume at the expense of underwriting profit. The extraordinary investment results of the last few years have built up surplus which generates underwriting capacity," Mr. Fedor said. "We don't see any new liability exposures on the horizon to drain capital. Even another Hurricane Andrew would only cause a firming of the market but not a dramatic turn around. Certainly, the marine and aviation sides of the market would not be affected," he commented.

As for the year-end outlook, Mr. Fedor predicts continued modest reductions in price barring a major catastrophe loss. He cautioned, however, that there are some preliminary signs indicating potential hardening in the retrocession market following losses caused by Hurricane Georges.