Hannover Re expects intense competition for January treaty renewals, with sustained pressure on prices and conditions – but it says catastrophe reinsurance rates in some markets may have bottomed out.

The need for returns on equity and a greater focus on pricing discipline may stabilise rates compared with business renewed this underwriting year, the company says.

North American natural catastrophe prices have fallen sharply, and Hannover Re says it is becoming increasingly difficult to secure adequate margins.

“Even allowing for the fact that rates in North America are crucially driven by how costly the hurricane season proves to be, they are unlikely to sink any lower in view of risk considerations,” it said at the Reinsurance Rendezvous in Monte Carlo.

“What is called for here is underwriting discipline on the part of all market players.”

Hannover Re forecasts New Zealand rates will hold broadly stable due to uncertainty associated with further run-off of losses from the 2011 earthquakes.

“For the Australian market, too, prices are likely to remain unchanged on the whole.”

The reinsurer says it is well placed, despite market capacity exceeding demand following an absence of large losses and inflows of capital from alternative sources.

“Even in a soft market environment we can expect stable, attractive business opportunities on the basis of our excellent ratings,” CEO Ulrich Wallin said.

Munich Re says strong competition and low interest rates will dominate the environment for the start of negotiations on January 1 treaty renewals.

“In standard business we will continue to resist pricing pressures and withdraw from business if necessary,” Reinsurance CEO Torsten Jeworrek said.

Lloyd’s Director of Performance Management Tom Bolt says the market is unusual compared with previous soft periods, given both its lack of investment income and level of surplus capital.

“Excess capital is always a feature of the soft cycle, but what we have this year is close to an epic excess,” he said. “At the same time, the regulatory burden on the industry is heavier than it’s ever been, and all this is happening while the economic recovery is still fragile.”

Market conditions are unlikely to improve for insurers in the near term, he says.