All these competing factors resulted in wide-ranging rate movements across the reinsurance market through the 2011 renewals, with only certain regions and lines of business experiencing rising pricing trends. Pricing for property lines varied depending on region, catastrophe exposure levels and loss experience. Though the picture was complicated in the United States by the RMS model change, Guy Carpenter estimates U.S. property rates during the June and July renewals increased in the range of 5 percent to 10 percent on a risk adjusted basis, as measured by RMS v9 (1) . However, incorporating a view of risk using RMS v11 saw risk adjusted pricing fall 15 percent. As illustrated by the wide disparity in quotes during the renewal process, the market has yet to develop a consensus on the adoption of RMS v11. But, we expect companies to have fully digested the changes by January 1, 2012, as they gain a better understanding of how the revisions will affect their business.
Loss-affected areas in Asia saw dramatic rate increases in property lines in response to the earthquakes in Japan and New Zealand and the severe weather in Australia. However, rates were flat to down elsewhere in Asia, particularly in countries unaffected by catastrophe losses. The market has been more stable in Europe, where pricing pressures continue to be subdued.
Despite significant rate increases seen in markets exposed to property catastrophe losses, widespread hardening in the broader reinsurance market has not yet materialized. Market conditions for property programs that do not have significant catastrophe exposure continue to be competitive. Pricing also remains generally soft in longer tail casualty lines, with rates flat to down. The perception of adequate sector capital and intense competition continues to prevent market hardening. These factors, along with future catastrophe activity and the wider macroeconomic environment, will be among the most important drivers in determining the direction of the market.
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1 RMS v9 was used to provide a consistent measure of the level of risk from 2010 to 2011.