The soft market unsurprisingly continues in the reinsurance sector.

Reinsurance companies, which sell backup protection to insurers, charged about 5% to 10% less as they negotiated new catastrophe coverage that kicked in on Jan. 1, according to brokers who arrange the coverage.

The price decline from a year earlier came despite a flurry of natural disasters in the first half of 2010. The roster of catastrophes included earthquakes in Haiti and Chile, the sinking of the Deepwater Horizon oil rig in the Gulf of Mexico, and a massive windstorm in Europe. Catastrophes are often the trigger for reinsurance price increases.

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The June-to-November hurricane season in the Atlantic Ocean means the second half of the year is normally more costly for the insurance industry. But the deadly storms stayed away from U.S. shores in 2010. Reports from the leading reinsurance brokers point to the absence of hurricanes in the U.S. as one reason for the pricing declines for the Jan. 1 renewals. The majority of primary insurers lock in their protection against large losses for the coming year by Jan.

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1.

This is of course good news for insurance buyers in the near-term. But for insurers?

Not so much, particularly when it comes to the casualty lines.

It typically takes years before the claims from such policies become clear, but analysts have increasingly said that both reinsurers and primary insurers are likely charging too little for the coverage.

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Reinsurance pricing for the Jan. 1 renewals “lacked the increases necessary for long-term health” of reinsurance companies, said Brian Boornazian, the head of reinsurance operations for Aspen Insurance Holdings Ltd. (AHL).

“The much-needed improvement in rates remains elusive,” Boornazian said on a conference call

With Guy Carpenter estimating some $19 billion in excess capital for reinsurers currently and no immediate signs of the primary market increasing demand, this doesn’t seem likely to change in the immediate future.