Premium rates will not harden locally while global reinsurance markets remain flush with capital, according to JLT Australia CEO Leo Demer.

Citing recent losses from the BP oil spill in the Gulf of Mexico as having little impact on reinsurance capacity – a key weather vane for local insurance pricing – Mr Demer told insuranceNEWS.com.au local rates won’t rise while reinsurers remain profitable.

Insurers insist they are pushing up premiums across the board after years of tight margins. But brokers are in many cases acting as a buffer to rising rates by leveraging the competitiveness of the market to stymie more aggressive rate hikes.

Mr Demer, head of the fourth-largest brokerage in Australia, insists there is “no sign of the market hardening at all”.

“The market is still quite soft at the moment,” he said.

Mr Demer’s observations coincide with a recent Willis Re report which says major losses from the Chilean earthquake and storms in Australia in the first quarter of this year have had little impact on global reinsurance pricing.

Insured losses from both events are expected to surpass a combined total of $US10 billion ($11.98 billion).

“I really don’t see this impacting on the market,” Mr Demer told insuranceNEWS.com.au. “I don’t think the reinsurers have been hurt.”

While projected clean up-costs, legal bills and fines from the Gulf of Mexico oil spill surpass tens of billions of dollars, the financial impact on the insurance sector is limited and spread across a number of insurers.

As BP self-insures through its captive, Jupiter, the bulk of liabilities will be worn by the corporation’s balance sheet.

Lloyd’s is projecting a maximum of $US600 million ($718 million) in losses from the disaster, while the world’s top four reinsurers, Swiss Re, Munich Re, Hannover Re and Partner Re, are expected to take a combined hit of $US423 million ($506 million), according to the Insurance Information Institute.

Insured losses from the Gulf of Mexico spill are dwarfed by the Chilean earthquake, with Swiss Re alone set to lose $US500 million ($599 million).

Willis Re, in its report on the June 30 reinsurance renewals period, says there were no market moves to increase prices, “despite the fact that the Chile earthquake and Australia storm catastrophe losses, together with some other minor catastrophe losses, are probably sufficient to erode the entire 2010 catastrophe excess of loss premium base outside of the US”.

Willis Re CEO Peter Hearn says while an upturn in reinsurance pricing is imminent, its timing is uncertain.

“There is a concern that the longer the wait for any upturn in the reinsurance market, the more abrupt it will be once it eventually arrives,” he said.  

Reinsurance broker Aon Benfield claims pressure on rates is limited to regions with catastrophe loss activity, with July 1 renewals generally continuing to decline in price.