MUNICH (Bloomberg) ? Hannover Re, the world's fourth- largest reinsurer, expects prices for coverage in storm-affected areas in the US to rise by about 50 percent, even if this year's hurricane season doesn't lead to major damage claims.

The jump in rates for property and casualty reinsurance contracts renewed next January will probably match the gain seen in July, as reinsurers reduce coverage in areas at risk from storms, management board member Ulrich Wallin said in an interview.

Reinsurers, which help insurers such as Allianz AG shoulder risks they assume for clients, have raised prices and scaled back coverage in areas hit by last year's record Atlantic hurricane season. So far this year there have only been five named storms and forecasters have reduced predictions for this year's season.

"Price increases of 50 percent should indeed be possible simply because reinsurers provide less capacity in the Gulf of Mexico," said Rene Locher, an analyst at Kepler Equities in Zurich who has a "reduce" rating on Hannover Re shares. "Still, we will see a decline in premiums in non-storm affected business, which won't be compensated by the rate increase in storm-affected areas."

In hurricane-affected regions, insurers will need more reinsurance capacity than last year, because the risk models they use have been adjusted for higher claims estimates, Wallin said. Reinsurers and insurers will begin negotiating rates for the January renewals at an annual industry meeting in Monte Carlo that runs from September 9 to 14.

"An increase of about 50 percent should be the market's average," Kepler Equities' Locher said. "I expect the major European reinsurers to act in a disciplined manner. Only the Bermuda-based reinsurers who specialise on natural catastrophe coverage could add some pricing pressure."

Price increases for business exposed to natural catastrophes in the US "result from a revised estimate of the loss potential after Katrina and will therefore be sustained," Munich Re management-board member Torsten Jeworrek said.

Hurricanes Katrina, Rita and Wilma, three storms that pummelled the southeastern US last year, caused rating companies such as Standard & Poor's to toughen their standards, forcing some insurers to limit their policy sales.

"Reinsurers can write less catastrophe business with their existing capital," Wallin said. That has caused "a reduced supply of catastrophe capacity in peak zones and has driven prices higher," he said.

Forecasters have scaled back earlier estimates for the 2006 Atlantic hurricane season following indications that last year's record destruction won't be repeated. Katrina and other storms caused $83 billion in insured damages last year, according to estimates from Munich Re, the second-largest reinsurer.

"Competition has intensified in non-catastrophe-exposed areas," Wallin said. "Many reinsurers try to balance their risk portfolio" by signing more business in non-catastrophe- exposed areas, while demand in such areas "has stabilised or is even declining a bit."

The Atlantic hurricane season began in June and ends in November. Through the end of August, five named storms have formed in the Atlantic. Hannover Re expects gross premium income to rise as much as five percent this year. Return on equity, a measure of profitability, is expected to be at least 15 percent. The reinsurer in March said that would translate into net income of about 450 million euros, based on 3 billion euros of shareholders' equity and average costs from disasters.