Rates for catastrophe reinsurance business not affected by losses could fall by double-digits at the Jan. 1 renewal, according to a report by London-based stockbroking and advisory firm Peel Hunt L.L.P.

The report, “Non-life Insurance: Cat Flaps,” covers several companies active in the Lloyd's of London market: Amlin P.L.C., Beazley P.L.C., Catlin Group Ltd., Hiscox Ltd., Lancashire Holdings Ltd. and Novae Group P.L.C.

The report said the prospects for nonlife underwriters are good despite the fact that catastrophe reinsurance rates may come under further pressure.

Peel Hunt said that, given the benign North Atlantic hurricane season and the continued presence in the market of nontraditional capital such as pension funds, catastrophe reinsurance rates likely will fall at the Jan. 1 renewals “barring an exogenous shock in the intervening period.”

Rates for U.S. commercial insurance and specialty lines business, however, may remain stable or harden, although some catastrophe reinsurance capacity may be redeployed into such lines, it noted.

An uptick of loss activity in the third quarter of the year, including floods in Europe, may mean that catastrophe reinsurance rates on some business in Continental Europe may increase at the upcoming renewal, the report noted.

Nontraditional capital is “likely to prove sticky” and remain in the industry, the report noted.

Peel Hunt said it was “nervous about the implications” of follow-form facilities between brokers and underwriters in the London market such as the sidecar deal between Aon P.L.C. and Berkshire Hathaway Inc., announced earlier this year, and the recently announced Global 360 facility set up by Willis Group Holdings P.L.C.

“Such deals appear to reduce the volume of business that can be competed for within the Lloyd's market and also, to a greater or lesser extent, devolve underwriting responsibilities from the risk carrier to the broker,” the report said.

“This questions the quality of business that will be underwritten under such agreements with the broker having a clear conflict of interest, although we understand in respect of the Willis deal that insurers will have the right to reject business that does not meet underwriting criteria,” it said.