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Primary rates unlikely to plummet: Reinsurer


ZUG, Switzerland— European primary insurance buyers should not become over-excited about the latest slew of reinsurance company renewals figures according to Inga Beale, chief executive officer of Zug, Switzerland-based Converium Holding Ltd.

Ms. Beale reported a 3% increase in volume of business written at the year-end renewal and an overall reduction in rates of about 1% across its book.

She said that the big reinsurers appear to have held pretty firm on pricing in most lines and so buyers should not expect their insurers, that have retained more business this year, to be in the mood to offer big reductions as a result.

"Some big buyers have gained reasonable treatment and we are seeing some reductions generally in those lines where there is abundant capacity. But I don't think that insurance buyers can expect to see many reductions," said Ms. Beale.

"We experienced prices down only by about 1% and so this will not have a huge impact. Also don't forget that pricing is much more linked to exposures these days, at all levels," she continued.

The figures reported by Ms. Beale underscored the steady recovery at Converium, a company that was almost forced into run-off in 2004 after massive U.S. reserving problems, triggered credit rating downgrades out of the critical A range.

The company placed its U.S. business into run-off and was effectively banished from key broker markets such as Australia, the United States and the United Kingdom because all the major brokers applied so-called 'placing restrictions', effectively warning buyers off the troubled company because of its sub-A credit rating.

The group's gross premiums fell from $3.8 billion for the full year 2004 down to just under $2 billion in 2005.

Ms. Beale said that confidence is steadily returning among customers and brokers as the group puts is past problems behind it.

She said that on Monday the group had received notice that the only remaining broker to maintain a placing restriction on the company had lifted it, and that overall revenues from brokers had increased 11% on the 69% of its business renewed at year end.

Converium expects to write up to $2.2 billion in gross premium this year.

Ms. Beale said that the group's overall revenue remains roughly $1 billion below where it should be because it has still not received an upgrade back into the A range.

She said she was disappointed that the upgrade had not happened in time for the renewals just past because the rating agencies are awaiting confirmation from the U.S. Securities & Exchange Commission that it is happy with an income restatement carried out last February. She was unable to say when the S.E.C. would announce its decision.