The January 1, 2007 non-life renewal results are in. Despite a good portion of premiums leaving the reinsurance market, the renewal was orderly, with a reasonable level of competition. But on January 2, substantial change was afoot. 2006 proved to be a record year for the insurance and reinsurance industry – I characterize 2006 as a 1-in-20-year occurrence – when everything went right for the industry. As is usually the case, when the non-life pricing cycle reaches such peak levels, change is imminent. Several market influences will create that change, which will in turn affect the insurer-reinsurer relationship.

First, you, the world’s insurers, are in a very strong financial position, allowing you to retain more of your risk (and premiums) rather than use reinsurance. The current low level of insurance losses worldwide accentuates this ability.

Not only will premium leave the market due to higher retentions, but other external factors are threatening to accelerate change. We expect to see more regulatory intervention. The re/insurance market in both the U.S. and Europe are facing tough questions about levels of profitability and how they are sharing that profit with their constituencies and insureds. We have already seen this in the new Florida legislation, where state lawmakers felt they needed to stem the high price of homeowners insurance in their state, and dramatically increased the state’s role in the reinsurance market. The concern, of course, is that this kind of tinkering migrates to other jurisdictions.

The third factor of change will be competition among reinsurers for what is left. For some companies the driver will be preservation, while for others it will be survival. Either way, the struggle is now on for reinsurers to maintain adequate levels of profitability.

What does this mean to you? There will be increased pressure on reinsurers to put at risk the very value that we bring you. As a reinsurer, our goal is to provide a product of value. That means we must provide appropriately priced capacity when you need it, conduct clear and open dialogue so that you know where we stand in relation to your needs, and above all we must be able to pay your claims. Simply put, we must “be there” when you need us.

At PartnerRe, we believe we know our clients well and therefore our approach will not change. The fact is, the risk has not changed and in our business we know the key to certainty of claims payment is ensuring that the price of coverage is commensurate with the risk assumed. We know you will approach this market intelligently: You will decide what you need, how you will preserve the strength you have earned and when you need the backing of a strong, reliable reinsurer. We hope that as you change your reinsurance purchasing and as more choices are offered to you, that you will remember the support that was there in the more difficult times, and that you will continue to put value and quality into your decision criteria. We believe that on the basis of those principles, PartnerRe can continue to have a place in your risk management plans.