It is too early to categorise the 2006 hurricane season as benign, the head of a Bermuda-based insurer warned this week.

Stephen Catlin, the chief executive of Catlin Group Ltd., forecast a decline in premiums for non-catastrophe exposed classes of insurance and reinsurance if the current hurricane season remains benign, but warned against "euphoria".

At a lecture on Wednesday at Lloyd's of London, he said: "There is currently an amount of euphoria about the current hurricane season," he stated. "While this euphoria grows more appropriate as the days pass, we must remember that the hurricane season does not end until November 30."

Mr. Catlin, whose speech was reported on the Insurance Journal website, based his observations on The Catlin Group's broad experience in the P/C market. It has four operating companies ? in the US, Bermuda and the UK, and concluded that "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."

He noted the big increases in these classes of insurance and reinsurance since the record series of hurricanes in 2005.

Mr. Catlin said it was still possible that there could several large hurricanes but no single "mega-catastrophe" like Hurricane Katrina in 2005, in which case premiums for catastrophe exposed classes of business would likely increase further, but "rates for non-catastrophe exposed business, such as casualty classes, would likely remain flat or increase slightly under this scenario".

And if the 2006 season "turns into 2005 with insured damage exceeding US$60 billion ? 'there could be a severe shortage of capacity for catastrophe exposed classes of business'," Insurance Journal said.

"In addition, any further catastrophe losses sustained by insurers and reinsurers during 2006 would likely mean substantially increased rates for non-catastrophe exposed classes.

"At the end of the day, it is market forces which will decide the direction of rates," he continued. "And, no matter the outcome of the hurricane season, disciplined underwriting is needed for a strong marketplace."Mr. Catlin also called for a broader approach to analysing hurricane risks, noting that hurricane models in 2005 failed to account for rapidly escalating property values in catastrophe exposed regions, like Florida and the US Gulf Coast.

"The catastrophe models ? both the commercially available models and the models developed in-house ? did not adequately capture the rise in economic values in Florida and along the Gulf Coast," he continued. "We got the economic values wrong, so we also got the insured values wrong and therefore we got the 'PMLs' wrong," he stated, referring to the probable maximum loss that an individual company would sustain from a catastrophic storm.

Mr. Catlin said people who chose to live in high risk areas had to take more financial responsibility.

"Is it reasonable to expect state or federal governments to subsidise the cost of insuring properties in high risk areas?" he asked. "Is it reasonable to expect the insurance/reinsurance industry to do so?"