Reinsurers have told the annual Reinsurance Rendezvous meeting in Monte Carlo that the industry can expect further price increases at the January renewals.

Hannover Re CEO Ulrich Wallin expects “further appreciable price increases” for Australia and New Zealand covers, and Swiss Re CEO Stefan Lippe expects a modest, broad market turn over the next three to 15 months.

However, both of them note that pockets of soft pricing remain due to reinsurance capacity.

Mr Wallin anticipates stable to rising demand for reinsurance due to measures such as Solvency II and the latest adjustment to the Risk Management Solutions model.

Vigorous growth in emerging markets such as China and Brazil and in the retakaful (Islamic) sector is also boosting demand.

Hannover expects rates in North America to harden even with a moderate hurricane season because floods and tornadoes have stretched the balance sheets of US insurers and reinsurers.

Swiss Re Chief Underwriting Officer Brian Gray says low interest rates “have been the real shock for the industry over the last three years, and are far more significant than the 2010/11 natural catastrophes”.

“If not compensated for by significantly lower combined ratios, the earning capacity of the industry will erode over time.”

Dr Lippe says low interest rates, volatile stock markets and uncertainty around inflation pose a significant challenge to the industry.

He says Swiss Re has applied strict underwriting discipline over the soft cycle, forgoing market share if price was inadequate.

“In 2011, the company saw successful renewals, with its P&C treaty portfolio growing by 20% while price adequacy was maintained.”

Hannover Re says uncertainties on financial markets and the challenge of generating adequate investment income should result in considerable discipline when it comes to technical pricing.

It says risk management remains crucial and, along with retrocession, the group took out additional coverage in the first quarter with protection against US catastrophe risks.