Bermuda-based reinsurer ACE Ltd. and US insurer the Hartford were singled out by analysts at Lehman Brothers, as noticing the beginnings of improved prices in their market.

In their August, 2000 report the analysts offer "a glimmer of hope for reinsurance prices''.

"Management's tone on several of the investor conference calls that followed second-quarter results suggested that July renewals were at higher prices than January renewals,'' the report read.

While improved prices to reinsurers is good news for that industry, it translates negatively for primary insurers who will as a result experience increased costs and lower profit margins.

According to the Lehman analysts companies that use a lot of reinsurance could see their profit margins fall if the profitability of the underlying business does not rise faster than the price of reinsurance.

The report also points out that retrocession (reinsurance sold to reinsurers) can greatly impact the picture but is difficult to quantify.

"Retrocession results are typically not broken out from the rest of reinsurance, but most industry participants will tell you that prices have been extremely competitive and losses have been high,'' the report said.

"Our concern is just how much some reinsurers have been supporting their profitability by buying cheap retrocession.

"If the price of retrocession rises, then all things being equal the margins for some reinsurers will likely fall.'' The Lehman analysts in the property and casualty industry August report also announced that they are taking a "neutral stance'' after a mid-year review.

"Essentially our position is unchanged from the beginning of the year, except we feel more strongly that commercial line insurers will benefit from rising prices and that personal line writers will be caught between a continued competitive marketplace and rising claims costs.''