Bermuda's reinsurers have given a mixed reaction to the average reinsurance renewal price drop of nine percent.

They reckon a number of reinsurance companies could be left exposed to taking a bigger hit in the event of a natural disaster as a result of the fall in rates, but believe the market is resilient enough to bounce back from any such setbacks.

As reported in The Royal Gazette on Thursday, some areas of reinsurance are faring better than others, with the cost of marine reinsurance dropping only slightly and the price of reinsuring reinsurers against property losses also holding up, according to Bermuda-based insurance broker Wills.

Jim Bryce, CEO of IPC Holdings, admitted it was a difficult renewal period for reinsurers due to the sheer amount of competition, leading to flexible pricing.

"I guess it was a little bit erratic because it was almost like a bungee jump in that this renewal each day had its ups and downs," he said.

"I think it was not just a pricing issue - many brokers for various reasons were trying to make their clients happy by looking at amending terms and conditions.

"There were many moving parts and a lot of noise over the renewal and at the end of the day, many of the terms and conditions were withdrawn, except changes in certain clauses and flexibility in terms of price."

And he claimed the renewals very much reflected what was going on in the US and Europe in terms of natural disasters during last year.

"I think people seem to be generally looking at renewals in the US and primarily in Europe," he said.

"I guess in the US you really didn't have much loss activity - I think all rates were down because there were no losses - you had more supply than demand, so I guess it was somewhat in line with expectations.

"The wildfires in California not a big reinsurance event, while the two big European reinsurance companies put a grim face on many of the European renewals and rates were down as a result."

But, despite all of this, Mr. Bryce believes the reinsurance market is still in good shape going into 2008.

"Overall, I think it was in line with coming off a pretty good 2007 year and it just validates a great reinsurance market that has got hit with Alzheimer's," he said.

"2005 was the end of the world according to a lot of people, but I guess when the market bounces back it is resilient - there is lots of retention.

"The Bermuda market looks pre-eminent on the world reinsurance stage and there is plenty of capacity both real and synthetic.

"I think market conditions are still healthy and prices are coming off at least at healthy levels, so it is not all doom and gloom and the end of the world, but it was tough.

"It is now a question of what prices are brought in by the next big renewal dates and whether we have a big loss between those dates."

Gary Prestia, Flagstone Re's chief underwriting officer for the North America region, said a nine percent reduction on average is in line with what the industry saw for January 1 renewals, which reflects some reductions in peak coastal and key EQ peril exposures as well as an "experience credit" for the past two years of below average North American reinsured cat losses.

"Premium reductions become a concern if the trend continues or accelerates as margins deteriorate over time," he said.

"On the business we wrote at January 1, we feel we have still achieved at or above the technical pricing rates to achieve an adequate return for shareholders.

"Programmes having reported recent loss activity and those exposing peak zones are generally more adequately rated as well as middle to upper cat layers less prone to frequency loss. Loss-free regional and non-peak zone programs are generally more competitive due to the excess capacity available and the attraction of diversification.

And he expects this moderately downward trend to continue until technical floor pricing is reached and/or a major or aggregation of large industry losses causes it to reverse.