However as Flagstone Re’s Chief Underwriting Officer – International Guy Swayne explained the market has been hit by the influx of new capacity keen to get a stake in programmes.

It has led to a further softening of rates at a time when the industry is well capitalised and off the back of a year which saw heavy cat losses in the first half but not the major event that would have made the market rethink pricing strategies.

However, while the Deepwater loss was predominantly contained within BP’s captive the first deepwater well blow out in history coupled with the talk over the hike in liability levels for operators in US waters has seen reinsurers take a tougher line.

“We have seen a rise in demand for energy coverage in the Gulf of Mexico and US energy risks and there has been capacity to meet the demand but prices have increased,” added Mr Swayne. “Some of the concern has been the lack of clear direction from the United States' government on its future approach following the deepwater loss.”

Mr Swayne said the European market saw increased competition at 1/1.

“There has been a good deal of new capacity which has entered the market after the formation of new underwriting operations in the past year and we are also seeing some new capacity from Asia which has also looked to play a part on European programmes,” he added. “The result has been increased competition that put pressure on pricing and subsequently we have seen reductions in a large number of classes.”

Mr Swayne continued: “From a catastrophe perspective the global market is very much driven by what happens in the United States.”

However he said Bermuda and London had kept their discipline in the face of the challenge of other overcapacity and as such the market was still in good shape.

“Bermuda showed discipline as did the Lloyd’s market and we have seen in recent months the move towards greater levels of share buybacks as underwriters look to utilise capital only where there is an expectation of a valid return.”

Mr Swayne said the Bermuda market’s expertise across the reinsurance cycle had ensured that the underwriters were clear about the prices they were prepared to accept.

“History has shown the problems when rates are not technical and the enhancement in the sophistication of the modelling techniques has meant that there have been cases at 1/1 where capacity was withdrawn from classes and programmes where rates fell below acceptable levels.”