MUNICH (Bloomberg) — European property and casualty reinsurance rates may drop by about five percent to 10 percent when contracts come up for renewal in January, Standard & Poor's said.

"We expect this range of a decline at the current early point in time of negotiations for the renewals due in January," Peter Grant, a credit analyst at S&P, said in an interview in Baden-Baden, Germany. "There will be less pressure to lower rates in some catastrophe-affected property lines in the US."

The second year without a major hurricane is putting pressure on reinsurers, which help insurers such as Allianz SE shoulder risks, to lower rates. They meet with clients every October in the southern German town of Baden-Baden to negotiate January contract renewals, which are a key gauge for a reinsurer's future growth

S&P said in a report published on September 7 that it maintained a "stable" outlook on the reinsurance industry and is "cautiously optimistic" reinsurers will maintain a "discipline" in their underwriting in 2008.

Munich Re, the world's second-largest reinsurer, said it will resist "mounting pressure" on the industry to lower rates in the second year without a major hurricane.

S&P's current estimates for price reductions are "understating the magnitude of the effect on reinsurers' underwriting profitability as inflation adds about three to seven percent on the cost of claims as well," Grant said.

"Furthermore, primary insurers are increasingly demanding lower prices because their own premiums have declined faster than those of reinsurers," he said, adding that "recent good profits at primary insurers" will give them more bargaining power in the upcoming renewals because that will allow them to keep more business on their own books.