Rates for most lines of European reinsurance business fell at the Jan. 1 renewals, in a market characterized by ample capacity and an absence of large catastrophe losses, brokers say.

Brokers note softening reinsurance rates will be welcomed by corporate insurance buyers, already looking forward to large percentage-rate reductions on the back of a healthy European insurance industry and an absence of any large losses during 2006.

There is "relatively plentiful capacity in all areas" for reinsurance, except for U.S. windstorm-exposed business, according to Charles Cantlay, deputy chairman of Aon Re U.K., a London-based unit of Aon Corp.

On non-U.S. business, rate reductions of about 5% to 10% were the norm at the Jan. 1 reinsurance renewals, Mr. Cantlay said; there was still a "substantial amount of discipline" driven by rating agencies and investors, he said, and underwriters are not slipping below what they consider to be the "technical price."

Average European reinsurance rates fell by up to 10%, said Jean-Michel Lewis, director of reinsurance at London-based broker Heath Lambert Group.

Several newer Bermudian reinsurers were eager to write more European business, as part of their efforts to diversify, and played a part on some larger programs, he noted.

There was also interest by several reinsurers in writing Eastern European reinsurance business as programs in that region become more significant and underwriters seek to spread and balance their portfolios, Mr. Lewis said.

Reinsurers were "healthy and hungry" for European business, said Luc Malatre, managing director of Willis Gras Savoye Re in Paris.

But many primary insurers were willing to retain more risk themselves, he said.

In the Nordic region, reinsurance rates fell by between 5% and 15%, depending on class and loss history, according to Erik Roenningen, Oslo, Norway-based head of Nordic region at Willis Re, a unit of Willis Group Holdings Ltd.

There is a general trend of slight softening in most classes, particularly on business that is loss-free, he said, and there was ample capacity for most risks.

The rate reductions on reinsurance business may not always be passed on to primary insurance buyers, experts said.

Reinsurance pricing is "absolutely connected" with what is going on in the primary insurance market--the premium base which feeds reinsurers--said Mr. Cantlay, but there is a "disconnect" between the percentage decreases being seen on reinsurance business and being expected by primary insurance buyers.

While it has been clear to primary buyers that catastrophe rates have needed to adjust in line with recent events, buyers have struggled to reconcile themselves to reductions in limits available on some other lines of property business, according to Nick Maher, chairman of the global property practice group at Aon in London. And the reaction of some of those buyers has been to retain more risk, he said.

As 2006 progressed and the threatened active hurricane season did not materialize, buyers became ever-more unwilling to continue to "pay the price" for the 2005 year, he said.

On non-U.S., noncatastrophe property business, there have been "significant" rate reductions of up to 30% to 40% during 2006, Mr. Maher noted, especially where the risks being insured are "single territory."

During 2006 there was a continued softening of European primary property rates, according to Kevin Ferguson, head of property placement for Europe at Marsh Ltd. in London.

European natural catastrophe primary insurance rates in 2007 are expected to remain flat or see slight rises, he said, while noncatastrophe exposed property business may see rate decreases of 5% or more.

Over the course of 2006, there was a softening of the market for European casualty business, with average rate decreases of between 10% to 15%, depending on the nature of the industry being insured, noted Paul Ritchie, head of casualty placement for Europe at Marsh Ltd. in London.