Only yesterday credit rating agency Moody’s Investors Service changed its outlook for the global reinsurance sector to stable from negative which would on the surface appear to be good news for any insurance buyer worried about the security of the market.

But the reason why Moody’s changed its view is because it believes that there is positive momentum for a hardening in reinsurance rates as well as a new focus on the value of reinsurance and good risk management across the sector in response to recent catastrophe losses.

“Recent catastrophe losses loom large in our decision to revise the outlook to stable, as they have provided momentum for reinsurance rates to harden,” explains Dominic Simpson, a Moody’s Vice President and Senior Credit Officer.

However, Moody’s did note that, over the longer term, it remains uncertain whether this expected ‘plateau’ is a temporary halt to further pricing weakness or whether it will be followed by sustained market improvements.

This would all suggest that corporate insurance buyers should only prepare to press the panic button if a really big cat hits over the coming weeks.

But there are other forms of catastrophes, notably those made by people rather than the elements, or more specifically bankers, which could well blow the market over the edge regardless of the severity of hurricanes.

In the short term the Euro appears to be in big trouble as Chancellor Merkel and her allies in other European governments desperately try to prop up failing economies in Greece, Portugal, Ireland and elsewhere.

The analysts say that the insurers and reinsurers are not dangerously over-exposed but if share prices continue to tumble, and bond values too, then this will not free up underwriting capacity.

And, as Swiss Re’s Chief Economist Thomas Hess told CRE last week in Oslo if the long-term low interest rate environment that is forcing insurers, and ultimately policyholders, to pay the price for the financial crisis does not encourage insurers across the board to raise premium prices, adverse development from underpriced business in the next two years will certainly do so.

He warned that the loss of investment income to compensate for underpriced underwriting over the prolonged cycle will surely force a turn in the market and that such rises will need to be double digit and may last for a few years.

The dramatic hardening of the global reinsurance and insurance market occurred in 2001/2002 because three factors occurred at the same time: a huge catastrophe, tumbling equity prices and bond values plus no more reserves in the bank to cover years of soft underwriting.

Who is to say that the collapse of the Euro could not actually replace the catastrophe that shifted the market last time to make it all happen again a lot sooner and sharper than most people hope?

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