NEW YORK (Bloomberg) — Everest Re Group Ltd., the Bermuda-based insurer and reinsurer, said reinsurance rates are set to improve as the economic slump begins to abate and demand returns for some types of coverage.

The combination of lower rates and a drop in capital along with market volatility and the recession may lead to a "hardening" of rates, the company said yesterday in a regulatory filing. "The stage is set for firmer markets."

Rates have dropped as companies compete for customers who are scaling back purchases amid the recession. US commercial insurance rates dropped 4.9 percent in the three months ended June 30, extending a decline that began in 2004, according to the Council of Insurance Agents and Brokers. Everest Re said rates are increasing "in some markets and for some coverages".

Everest Re posted a 78 percent increase in second-quarter profit last week after policy sales improved. Premiums earned rose to $957 million in the quarter from $942 million in the same period last year. Premiums earned in the US reinsurance business rose to $296 million the second quarter from $238 million in the year-earlier period.

Everest has gained 10 percent this year, compared with the 12 percent increase in the 651 company Russell 3000 Financial Services Index.