The reinsurance industry is undergoing a renaissance, according to an industry veteran.

“While traditional reinsurance has taken a back seat in the last decade or two to other financial products,” Willis Re executive vice president Pete Thomas said, “With the recent subprime issues, the credit crisis, the problems we are facing in the entire financial service sector, traditional reinsurance is having a renaissance.”

Thomas, in a statement, said “the issue of reinsurance coverage is becoming far more important to clients and as a consequence we are discovering that traditional reinsurance skills are far more valued than they would have been five years ago.”

Calling reinsurance “the art of dealing with the unknown,” Thomas suggested that art has been eclipsed in the recent past by “financial engineering, financial products and other types of risk management mechanisms” that are “sexier and flashier.” In that climate, risks insurers face a renaissance in more traditional reinsurance skill sets.

“The reinsurance market as a whole right now is highly focused on rate changes with the market hardening and capacity becoming dearer as reinsurers are struggling with their own capital requirements,” Thomas said.

Thomas was one of several chairmen of the Berwyn, Pa.-based HB Litigation Conferences whose spoke about the global market in advance of its 16th Insurance Insolvency & Reinsurance Roundtable, scheduled in Scottsdale, Ariz., later this month.

The reinsurance industry is under siege on many fronts, making the multi-billion dollar industry a challenge for its players, said Tom Hagy, president of HB Litigation Conferences.

“From a tough market to increased competition, from climate change to calls for regulatory reform, from emerging risks to the credit markets crisis. They have it coming from all directions. But,” Hagy said in a statement, “in an industry where calculating risk is the name of the game, change is one thing our faculty of experts agrees is certain. It also is often where they can find opportunity.”

Neal Moglin of Lovells, a law firm specializing in reinsurance, pointed to the soft market and competition in reinsurance of the last several years as big changes in the industry.

“There are a lot of people who thought rates were going to go up,” he said, “but there are also some companies right now that are motivated to retain business against some challenges.”

But “that is just a function of the market,” Moglin said, noting that there is “frequently a disparity in the players and it is not always a level playing field. You look to attract business the way you can and there might be some holding the line on rates that might be affecting other reinsurers. So the market is potentially changing and the market might tighten up, at least at the upper end.”

In a survey of reinsurers’ statutory underwriting results conducted by the Reinsurance Association of America, a group of 19 U.S. property-casualty reinsurers wrote $23.9 billion of net premiums in 2008, an increase of $1.2 billion from the same period in 2007. The combined ratio for the group was 101.8%, deteriorating from the 94.7% combined ratio reported for the same period in 2007. The combined ratio is attributable to a 71.0% loss ratio and an expense ratio of 30.7 %. Policyholders’ surplus was $64.4 billion, down from the $75.9 billion reported for the same period in 2007.

Moglin said new threats await the underlying insurance market. “Underlying insurers, the ceding companies, are grappling with new products, new technologies, new threats like global warming and haven’t really decided yet, particularly in the area of climate change, how they’re going to react,” Moglin said. “As a reinsurer it is very difficult to underwrite the underwriting of a direct writer – particularly in the D&O market or the environmental insurance market – if you aren’t sure how that market is responding to potential threats.

“On the flip side,” he added, “there is a potential opportunity to market some innovative products to deal with these challenges.”

New threats always result in this kind of uncertainty, he said. “We are at an interesting and exciting time in the industry because this hasn’t happened in a while,” Moglin said. “So insurers are trying to come to grips with what their products do and don’t cover, and what, if any changes they need to make in their wordings, but also what if any changes they need to make in their underwriting.”