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Member, Beacon International Group, Ltd.
LONDON--While European reinsurers have benefited from hard market conditions and seen their financial strength improve over the past two years, there is unlikely to be a return to the higher financial strength ratings of recent years, according to A.M. Best Europe in London.
Between April 2002 and April 2004, A.M. Best downgraded six of the ten largest Continental European reinsurers.
Speaking at a seminar in London Thursday, Stuart Shipperlee, an analyst at A.M. Best in Europe, explained that, despite rate increases across most lines of business written by Continental European reinsurers in the past two years and a fairly benign period of catastrophe losses, "the absolute levels of underwriting profitability are not as strong as might be hoped for at this stage in the cycle."
The 2003 underwriting results of European reinsurers benefited from rate increases, particularly on casualty business; tighter terms and conditions on reinsurance contracts; and a better understanding of underlying risks, Mr. Shipperlee noted.
But for many companies, he said, underwriting profitability is insufficient at this stage of the cycle.
Buyers of reinsurance have become increasingly focused on the creditworthiness of their reinsurers over the past few years, Mr. Shipperlee noted. And, particularly since the collapse of Gerling Global Re in 2002, buyers have tended to look for a greater spread of reinsurers, he said.
Mr. Shipperlee added, though, that because of the relatively limited number of highly rated reinsurers in Europe, this trend is perhaps taking place more slowly than was previously expected.