The arrival of huge amount of new capital has seen pressure on rates. But the underwriters who cover cat exposed risks have said they will not fall for the competitive pressure gambit this year.

Rates and conditions will not go into free fall.

The year has started with a bang in terms of the dire warnings of the risks the industry faces in 2007 and beyond. It comes as a sharp kick, following the benign and profitable year of 2006.

However, underwriters have been quick to say that, at best, 2006 was a pleasant surprise and in all likelihood it was the calm before the real storm, which means rates and conditions will not go into freefall.

The arrival of huge amount of new capital has seen pressure on rates. But the underwriters who cover cat exposed risks have said they will not fall for the competitive pressure gambit this year, and that if it is not written at a technical level they will not write it at all.

Once again fine words, but will they be backed by action in 2007? 

There are those that say they cannot afford not to, while others (notably the brokers who sense blood) believe that pressure on rates will see a softening of the market.

Those who take a more conciliatory line believe it may well be a bit of both, with rates softening outside of the US cat exposures but not to the levels that clients and brokers would hope.

The year could also be one for a new flu pandemic. Echoes of the Spanish Flu outbreak of 1917 have been mentioned but the use of air travel is expected to make the spread of the disease far more difficult to control.

Scene of deserted streets and business unable to move goods from one area to another have been described and warnings that the market need to come up with some solutions have been given.

Throw in the ever-present threat of further terrorist attacks across the globe and political risk, along with Russia seemingly speedy willingness to turn off the oil and gas supplies to neighbours states which president Putin sees as dissident, and 2007 is shaping up to be a risky business for insurers and brokers alike.

Will it drive the thriving run-off market? There is every indication that capacity will be moved quickly this year and exit strategies may well be at a premium.