LONDON - Global reinsurance prices are expected to remain firm for Jan. 1 renewals and stay that way through the April and July renewals, according to a reinsurance market outlook report released Thursday by Aon Benfield.

The London-based reinsurance brokerage arm of Chicago-based Aon Corp. said it expects reinsurer capitalization to be down by 15% to 20% for the year ending Dec. 31, 2008. Aon Benfield's report adds that the impact of the credit crisis combined with catastrophe loss expectations will contribute to firm pricing.

Approximately 90% of the decrease in reinsurer capital is due to the credit and liquidity crisis, the report said, making it the first time that the market has firmed as a result of asset-related issues rather than ceded losses.

Reinsurers sustained over $10 billion in ceded catastrophe losses in 2008, Aon Benfield said in its report. However, the brokerage said because of industry profits in 2006 and 2007, reinsurers have maintained the capital necessary to underwrite risk.

"Despite significant investment-related losses, equity capital remains at appropriate levels to support underwriting risk for reinsurers," said Byron Ehrhart, chief executive officer of Aon Benfield's analytics group in a statement.

Aon Benfield said it expects the April-through-July reinsurance renewal market to be similar to the January market. The brokerage said U.S. hurricane and earthquake reinsurance pricing is rising modestly, but that pricing could significantly increase for those exposed in Florida due to the uncertainty associated with the state's partially mandatory, partially optional residential hurricane loss reimbursement program.

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