Reinsurance rates rose modestly at mid-year renewals but not because of a hardening market, according to broker Willis Re.In its report entitled “Looks Can be Deceiving”, Willis finds that increases in some lines of business are down to modest losses and poor results, rather than a trend of rising prices.“The reinsurance market is stable and orderly, but the reality is that it is not hardening,” says Peter Hearn, chairman of Willis Re. “In fact, some buyers with loss-free programmes, even in areas of peak exposure, have managed to obtain risk-adjusted rate reductions at the June 1 and July 1 renewals.”In the US catastrophe market, in which Bermuda reinsurers have an approximately 40 percent share, Willis said rates rose by as much as 7.5 percent, but in some catastrophe loss-free areas, rates fell by as much as ten percent.The report also highlights the growing role of insurance-linked securities (ILS) such as catastrophe bonds in the market and how their increasing sophistication means they will compete more strongly with “traditional” reinsurance. Mr Hearn suggested that ILS still needed to tested as a long-term source of reinsurance.“While the influx of capital is clearly welcomed by buyers and has helped stabilise rate increases, underlying concerns remain over the durability of highly fungible capital,” Mr Hearn wrote.“Much of it is untested and conditioned by investor reaction to a major catastrophe event(s). Potential volatility is heightened by single-source investors versus funds or sidecars comprised of multiple investors.”The influx of ILS capital was keeping the lid on rates, he suggested.“Unfortunately, with many of the existing reinsurers trading below book value, the attractiveness of investing in more traditional, permanent capital structures is not readily apparent,” Mr Hearn said.“It is clear the damping effect on rates due to the influx of new capital is frustrating for existing reinsurers who are battling concerns over falling investment income and dwindling reserve releases.”