Reinsurers operating in Australia have not been tempted to cut premium rates in the same way as their UK counterparts, according to a leading reinsurer in the local market.

Sydney-based reinsurance expert Peter Nickerson told Sunrise Exchange News he agrees with a report by British reinsurance broker Benfield that the UK market is writing business at substandard rates.

Benfield says premiums for many risks dropped sharply in the December 31 renewals, with reinsurers ignoring pleas to keep prices high and cutting premium rates to win new business.

“A common theme was that in property and some casualty lines underwriters were willing to undercut their initial pricing in order to secure attractive business,” the Benfield report said, noting a “feel-good factor” among UK reinsurers.

Mr Nickerson, CEO of GE Employers Reinsurance Corporation, says the UK market “has become cheaper as a lot of business is going offshore due to softening; the attitude to capacity and ratings is naive”.

He says the Australian market, by contrast, is already rationalised and disciplined. “People have learned how tough the hard market can be after recent years and they are now pricing accordingly.”

The Benfield report says there is ample capacity in the UK market to write nearly all risks, and reinsurers have felt able to cut rates to win market share. Some have lowered premiums for property catastrophe risks by as much as 10%, while in Central and Eastern Europe it is as much as 20% cheaper.

But market leaders Munich Re and Swiss Re maintain they will walk away from business that is underpriced.