NEW YORK (BUSINESS WIRE) — Guy Carpenter & Company has published The World Catastrophe Reinsurance Market: New Capital Stabilizes Market, its annual, comprehensive study of the global property catastrophe reinsurance market.

The report, which covers 23 countries and four regions, representing more than 90 percent of the worldwide market for catastrophe reinsurance, finds the catastrophe reinsurance market stabilizing following a tumultuous renewal cycle in 2006.

Globally, rates dropped by six percent in 2007, versus an increase of 32 percent in 2006.

"2007 will be remembered as the year the catastrophe reinsurance industry righted itself, following record-setting losses in 2005 and soaring rates in 2006," said David Spiller, CEO of Guy Carpenter.

"The industry has absorbed the changes brought about by the mid-decade catastrophes, as well as the resultant pressures from rating agencies, regulators and modeling firms."

Mr. Spiller added: "One of the primary reasons for this moderating trend has been the industry's increasing embrace of the capital markets to transfer risk, whether in the form of catastrophe bonds, new start-ups or sidecars.

"Capital markets have become an integral part of the reinsurance business and are playing a key role in helping to reduce market volatility."

According to the report, following the record years of 2004 and 2005, total insured/reinsured losses in 2006 reached $15.9 billion, down significantly from $83bn in 2005.

Concurrently, new capital has been entering the industry at a record rate.

The catastrophe bond market witnessed a record level of issuance in 2006, with 20 transactions totaling $4.69bn in risk capital transferred to the capital markets, doubling the previous record total of 10 transactions in 2005, and, in terms of risk capital, representing a 136 percent increase over the previous record total of $1.99bn in 2005.

"If the central theme of global catastrophe reinsurance markets in 2006 was increased demand, then the theme of 2007 is increased supply," said Tim Gardner, Global Leader of Guy Carpenter's Property Specialty Practice.

"The demand for additional capital that we saw in last year's report has been met by a distinct upward shift in catastrophe bond issuance and the launch of new companies focused on the property catastrophe business.

"We are now starting to see these new ventures level out as the market returns to the downward phase of its cycle. Barring major disasters, we would expect to see further price declines at January 2008 renewals."

In addition to providing a review of catastrophe exposures and the availability of insurance from private and government sources, the study analyzes market conditions in catastrophe reinsurance on both a country-by-country and regional basis, taking into account natural catastrophes caused by perils such as typhoons and earthquakes, as well as acts of terrorism. New to this year's report are dedicated sections on India and China.

Among the report's key findings:

• Following the unprecedented North American catastrophe losses in 2005 and 2006, there was more uniformity in the global marketplace in 2007, with most countries experiencing single digit declines in price.

l Catastrophe losses have remained low for the past two years, contributing to greater stability in the market.

l The risk of terror events appears to have increased, driven by ongoing developments in the Middle East and Pakistan and recent plots in the United Kingdom. The US is expected to enact legislation aimed at making the federal government's backstop role under the current Terrorism Risk and Insurance Act (TRIA) more permanent.

l In North America, catastrophe cedents found relief after one of the most difficult markets the industry has seen. In contrast to January 2006, when rates nearly doubled and continued rising in response to hurricane activity, January 2007 saw renewal rates on the decline. In the US, the rate on line (ROL) index dropped by nine percent in 2007, after increasing 76 percent the year prior.