There are signs that the reinsurance market is firming up as insurers in wind-prone US states seek protection for losses during the hurricane season.According to UBS analyst Brian Meredith, Florida property catastrophe reinsurance rates were up by an average of 10 percent at June 1 renewals, while offshore energy coverage had seen 20 to 30 percent rate rises and an increase in demand.Should there be a hurricane generating insured losses of $20 billion or more, capacity shortfalls and a “hard market” would be the result, according to most market participants, Mr Meredith added.He expects rates to rise further this year and has put a “buy” rating on the shares of four out of the five Bermuda reinsurers named in the report Axis Capital, PartnerRe, RenaissanceRe and Validus.Meanwhile, reinsurance broker Guy Carpenter has reported a “volatile” renewal period in Florida. Depending on the method of measurement used, price changes could be anywhere between down 15 percent and up 10 percent, the company said yesterday.This year’s huge losses for the global reinsurance industry from earthquakes in New Zealand and Japan, floods in Australia and tornadoes in the US, has wiped out a large amount of excess reinsurance capital.But according to Mr Meredith, the main drivers of higher rates in Florida are updated computer models, particularly Risk Management Solutions’ version 11. This follows AIR Worldwide’s version 12 being introduced last year.“Changes in the RMS 11 catastrophe model were the principal reason for price increases in the US and why there is continued optimism for continued price increases through January 1, 2012, and potentially longer, in the view of some companies,” Mr Meredith wrote.The models are used to estimate insured losses in various disaster scenarios and the changes will mean that insurers will need to revise their probable maximum losses higher.Rating agencies are giving re/insurers who use RMS until early next year to adopt it. Mr Meredith said this should increase demand for property reinsurance, helping pricing.Most reinsurers had chosen to maintain or reduce exposure to Florida in anticipation of better pricing ahead as more companies adopted RMS 11, he added.The exception was Validus, whose creation of a new $180 million sidecar helped the firm increase its gross exposure to Florida by 30 to 35 percent.Axis is reducing catastrophe exposure in Florida, Mr Meredith said, while PartnerRe was “at the high end of the amount of catastrophe business they want as part of their total business mix” and so was not looking to increase exposure.Aspen, which writes higher layer catastrophe reinsurance, in which pricing was better, saw 20-plus percent rate rises on much of their Florida book.Mr Meredith added that RenRe had a lot of capacity available to deploy, but had not seen as much demand for retrocessional reinsurance as expected. More opportunities are expected at January 1 when most of the main programmes renew.Lara Mowery, head of global property specialty with reinsurance broker Guy Carpenter & Company, said: “To the extent that reinsurers have been incorporating some measure of risk generated by the new AIR and RMS model versions, it is more difficult to determine the definitive direction of 2011 pricing, although the market perception is that pricing has increased.”Guy Carpenter issued a report yesterday, which estimated that insured losses from catastrophic events over the past 16 months have caused insured losses of close to $100 billion.The broker estimated that reinsurance sector losses so far this year “are already more than double 2011 reinsurer natural catastrophe budgets”.However, the firm estimates that the industry is still adequately capitalised at the start of hurricane season, with roughly $10 billion in “excess capital”.David Flandro, Guy Carpenter’s global head of business intelligence, said: “Significant loss activity and major cat model changes since last year’s renewals have impacted each reinsurer’s capital position and view of adequate pricing differently.“The good news is that the reinsurance sector remains fully solvent, fully liquid and comfortably able to pay claims.”The Atlantic has a 65 percent chance of producing 12 to 18 storms, with six to 10 of them becoming hurricanes, according to the US Climate Prediction Center.The last hurricane to hit the US was Ike, a Category 2 storm, in 2008. There hasn’t been a three-year period without a US hurricane strike since the 1860s, according to Andover, Massachusetts-based Weather Services International, a software maker owned by the Weather Channel.