Life reinsurers are on top right now, according to a new market report from Standard & Poor’s.[@@]

“Steady demand, combined with reduced supply, has not only increased pricing power, but has also greatly improved the terms by which the game is played,” S&P credit analyst Rodney Clark writes in the new report.

Wilton Re, Greenwich, Conn., and 2 Hamilton, Bermuda, reinsurers, ACE Tempest Life Reinsurance Ltd. and Max Re Ltd., are getting into the life reinsurance market.

At least one relatively small, established player has shown an interest in buying market share.

Scottish Re Group, Ltd., Hamilton, Bermuda, ended up with 15% of the life reinsurance market by acquiring the U.S. life reinsurance unit of ING Groep N.V., Amsterdam. Scottish Re now ranks second in the life reinsurance market in terms of insurance in force.

But the market leader, Swiss Reinsurance Company, Zurich, still has a 30% share of the life reinsurance market, and in 2004 it reviewed its clients, “in most cases raising prices, and, in some cases, refusing to re-bid at all,” Clark writes.

In many cases, life reinsurers are tightening underwriting standards for direct writers, in part because of a sense that the direct writers have been keeping too little insurance risk, Clark writes.

Now, “we are seeing the pendulum swing,” and some direct writers are keeping more risk, Clark says.