UPDATE 1-Florida reinsurance rates up 15 pct -broker

*Rates reverse year-ago decline

*Rate rises in line with U.S. national insurers (Adds byline, quotes, further detail)

By Catherine Evans

LONDON, June 1 (Reuters) - Florida property-catastrophe reinsurance rates rose by 15 percent at the June 1 renewal, less than some had expected, but fully reversing the decline in prices seen a year ago, a leading reinsurance broker said.

The June 1 renewal, which coincides with the start of the North Atlantic hurricane season, sees many Florida insurers renegotiate the cost and terms of the annual property-catastrophe risk cover they buy from reinsurers.

Guy Carpenter, the reinsurance unit of insurance broking giant Marsh & McLennan (MMC.N), said Florida reinsurance capacity had shrunk since June 1, 2008 as a result of investment losses and costly disasters such as Hurricane Ike.

The price increase reversed a 15 percent decline at last year's June 1 renewals, but fell far short of that seen in 2006, when losses from Hurricanes Katrina, Rita and Wilma in 2005 pushed Florida reinsurance rates 22-45 percent higher.

The rise in rates was in line with those this year for U.S. national insurers, a trend the report said was set to continue through the wider July 1 U.S. property-catastrophe renewals.

Christopher Klein, Guy Carpenter's Global Head of Business Intelligence described the Florida market as "finely balanced", citing a narrow, plus-or-minus 3 percent average range of quotes, and firm order terms at 95 percent of the average quote.

"Those tight spreads, and a rate increase which was meaningful but below expectations, indicates to us a finely balanced market," Klein told Reuters.

"There was capacity to meet people's requirements this year, but there wasn't a glut of capital, otherwise things would have been much more competitive."

FINANCIAL CATASTROPHE

Klein said expectations that rates would rise by 20 percent had been based on losses from 2008 natural disasters such as Hurricane Ike and the "financial catastrophe" that has hit insurers' balance sheets.

The market's less dramatic reaction may reflect the limited impact of investment writedowns on operational cashflow, and recent signs of stability in financial markets that should mean insurers are able to raise fresh capital if needed.

"If capital is the raw material of the insurance industry and the supply of that raw material is easing, that would put a kind of supply-side pressure on pricing," Klein said.

The report of a decline of $2 billion in the Florida Hurricane Catastrophe Fund's (FHCF's) Temporary Increase in Coverage Limits (TICL) layer and liquidity needs within the rest of the TICL layer had led to an increase in demand of 5 to 10 percent for private reinsurance, helping push up prices.

Florida's state-run catastrophe fund reimburses private insurers for some property-damage payouts tied to hurricanes, a persistent threat for the fourth most populated U.S. state.

Traditional reinsurance capacity was down by 10 percent from June 2008, which combined with the exit late last year of many hedge funds from the market, had raised concerns about capacity.

"These anxieties were further exacerbated by the decline in the TICL. In the end, however, there was sufficient capacity in the market to meet cedents needs," the report said.

Improved credit market conditions, which have seen the estimated sum Florida could borrow to cover storm costs rise to about $8 billion from $3 billion in late 2008, also helped ease capacity concerns, the report said. (Editing by Rupert Winchester)