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Member, Beacon International Group, Ltd.
MONTE CARLO—Global reinsurers with weak balance sheets will have a difficult time attracting capital in the event of a big catastrophe, according to Moody’s Investors Service.
New York-based Moody’s, which changed its outlook on the reinsurance sector to negative from stable for the first time since 2005, said investor confidence in the market remains uncertain following reinsurers’ tumbling asset valuations in 2009.
With “many reinsurers currently trading below book value, you have to ask how much investor support there is for the reinsurance industry broadly,” Ted Collins, Moody’s group managing director, said Sept. 6 at the Rendez-Vous de Septembre reinsurance gathering in Monte Carlo.
The current sentiment could preclude weaker reinsurers, or those with deficiencies in risk management, from attracting capital after a big catastrophe, Mr. Collins said.
In a panel presentation, Moody’s analysts said they believe market confidence in the sector will remain “mixed” and more discriminating than in past downturns. The conditions are likely to mean that capital preservation will remain a priority for individual reinsurers, rather than seek to return capital to shareholders, the rating agency analysts said.
Confidence could be restored more quickly, however, if reinsurers can show the ability to fund their capital needs with earnings, the analysts said.