Reinsurance has served disaster-affected communities well this year, but there was always going to be a price to pay and it is being reflected in the reinsurers’ results for the September quarter.

Reinsurers went into the June renewals with renewed appreciation of the natural catastrophe risks in the Asia-Pacific region and increased potential losses due to updated catastrophe models.

While they have incurred heavy disaster losses this year, the companies’ results for the third quarter, covering the June treaty renewals, show that gross written premium from property and casualty reinsurance has risen.

Hannover Re increased gross premium in non-life reinsurance by 8.2%, saying this would have been 10.5% at constant exchange rates.

Property and casualty premiums rose 7.5% and were a bright spot for Munich Re, which has written over $1 billion off the value of its Greek bonds and, like all the companies, suffered from low investment returns.

Swiss Re increased premiums from property and casualty by 18%, saying the increase was mostly due to successful renewals and new business following the natural catastrophes in the first quarter.

The group says the reinsurance market has started to turn and it expects further improvements in the next six to 18 months.

Hannover says “the situation on international reinsurance markets is broadly positive”.

It says treaty renewals have brought sharp surges in rates, especially under programs that have suffered losses.

Not everyone is convinced, however, because there is still plenty of capacity in the market. At the reinsurance meeting in Baden-Baden at the end of last month, Allianz board member Clem Booth argued that pricing is still soft.

“There are as many competitive reinsurers in the game as there are those who are sticking to technical rates,” he said.

Investment analyst Chris Hitchings of investment bank KBW says that despite the difficult environment, the reinsurance industry is not sufficiently stressed for rates to rise across the board. “The fixation with when the reinsurance cyclical upturn will arrive seems somewhat premature. Judging by all of the available pricing metrics, we do not appear to have had the downturn yet.”

Chris Klein, the Head of Sales Operations UK and Middle East for Guy Carpenter, says despite competing pricing pressures “reinsurance capacity remains in good supply with the market unable to put down an anchor to stop drifting”.

He says individual loss experience will be rated accordingly and revised models may have an impact, but “we believe that with skilful negotiation and finesse, and in the absence of a major event, clearing prices on a risk-adjusted basis may be little changed for many at the January 2012 renewal”.

It is inevitable that reinsurers will talk pricing up and insurers will use capacity as a bargaining chip to talk it down, but the third-quarter results show that the largest reinsurers are increasing gross premium.

It is also inevitable that the companies will seek to recover catastrophe losses in the face of lower profits this year because of catastrophe losses and the turmoil on investment markets. The fourth-quarter results will give a firm indication and next year will show how the pricing battle has played out.