Primary insurance rates in umbrella and excess were up 4 to 5 percent in the first six months of 2012. The upward rate movement began during the latter part of 2011 and is continuing into 2012. Entering 2012, we expected continued rate improvement depending on the exposure, size of the insured and loss activity. Individual accounts (and certain classes of business such as energy, transportation and some contracting business) are seeing higher-than-average rate increases of low double-digits in some cases. With limited ability to generate investment returns coupled with a number of years of primary insurance rate reductions, increase in exposure bases due to a slowly recovering economy and loss trends, carriers are pushing prices higher.
Reinsurance capacity for renewals of proportional treaty was generally stable. Reinsurers who had reduced capacity for a number of years began to assess the business as a potential opportunity. Reinsurers are still very reluctant to provide support for a new transaction or a new operation. While there were no particularly noteworthy losses in 2011, general treaty capacity for energy risks continued to contract a bit following loss activity in 2010. Ceding commissions declined on average over the three years prior to 2012, and in 2012, they were mostly stable depending on loss development in the older years. Portfolios showing loss development from older years outside of expected led to some change in the ceding commission and other terms and conditions.