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Member, Beacon International Group, Ltd.
The outlook for the global reinsurance market remains negative, despite expectations that reinsurers will produce an underwriting profit in 2003, according to Standard & Poor's Corp.
In a report, Stephen Searby, a credit analyst at S&P in London, noted that despite generally improved results and rate increases, other factors continue to plague the reinsurance industry.
One such factor is the so-called "flight to quality," which has resulted in some weaker players seeing their share of better-quality business diminish, the report notes.
"It is not just the small players that are suffering. Some of the larger groups are losing business as cedents are also increasingly concerned about concentration of risk in their ceded portfolio," Mr. Searby said.
In addition, S&P said that while it does not expect to see many more large reserve increases this year for U.S. casualty business similar to those made in 2003, further adverse development on casualty lines written between 1997 and 2001 is expected, the report noted.
Another concern is the potential for diminishing parental support for those reinsurers that are subsidiaries of larger groups, the report states.
Increasingly sophisticated techniques for measuring the return on risk-based capital "gives management less of an excuse to persevere with underperforming units than in the past," Mr. Searby said.
Copies of the report are available only to subscribers of S&P's RatingsDirect service at www.ratingsdirect.com.