GERMANY (Bloomberg) <\m> Munich Re, the world’s second-biggest reinsurer, said premiums from property and casualty contracts renewed in January fell by three percent following an almost complete absence of costly natural disasters in 2006.Munich Re renewed about two-thirds of its traditional non-life reinsurance business in January with a premium volume of about nine billion euros ($11.7 billion), the company said yesterday.

“Competition is tougher,” management board member Torsten Jeworrek said in a statement. Munich Re removed capacity from the market where prices or terms and conditions weren’t met, it said.

The reinsurer, for example, said it gave up “considerable shares of the French and German motor business and international aviation fleet business.”

A year ago, Munich Re was able to raise rates for property and casualty contracts by an average of three percent. It almost doubled prices for reinsurance coverage in areas exposed to storms following the record 2005 Atlantic hurricane season.

“Despite the relatively quiet hurricane season in the Atlantic, prices for US hurricane-exposed business have risen significantly,” Munich Re said.

Increases in that area are in line with price levels seen at the July 1 renewals, it said. Prices for US hurricane-exposed business rose by about 30 percent from January to July last year, Munich Re spokeswoman Anke Rosumek said.

Last year, the insurance industry sustained its lowest losses since 2000, according to earlier statements by Munich Re. While insured losses due to tropical cyclones reached a record $87 billion in 2005, they fell to about $250 million in 2006.

“These are the first signs of a weakening cycle,” HVB Group analyst Lucio Di Geronimo wrote in an investors note. “The average price level decreased back to the levels of 2005. We had hoped for a stabilisation of prices at the 2006 level.”

Munich Re shares dropped 1.54 euros, or 1.3 percent, to 121.71 euros at 12 p.m. in Frankfurt. They’ve fallen 6.7 percent this year, valuing the reinsurer at 28 billion euros, second to Swiss Reinsurance Co.

Rival Hannover Re, the fourth-largest reinsurer, last week said it increased reinsurance premiums in catastrophe-exposed areas of the U.S. by 30 percent to 40 percent in January. Swiss Re has said it was a “good” season for renewals in storm-affected areas without specifying how much rates rose.

Munich Re in November raised its 2006 profit forecast to 3.2 billion euros to 3.4 billion euros and reaffirmed its target of a combined ratio of less than 97 percent.

The combined ratio compares insurance premiums collected to claims paid. Under 100 percent means an insurer’s premium income exceeds claims and costs, giving it a profit from underwriting.

The Munich-based reinsurer plans to provide detailed 2006 financial figures on Feb. 28. Reinsurers help primary insurers such as Allianz SE shoulder risks they assume for clients.