Moody's downgrades outlook on global reinsurance sector to negative
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Moody's Investors Service Inc. has downgraded its outlook on the global reinsurance sector to negative from stable, the New York-based rating agency said Wednesday.
“The outlook change was prompted by a number of factors that are pressuring reinsurers simultaneously: an oversupply of capacity, new entrants in the form of nontraditional capital, more substitute products, low interest rates, and greater bargaining power of buyers,” said Moody's in a statement about its new report “Global Reinsurance Outlook Turns Negative.”
In the statement, Moody's said that the current soft market shows many of the traits of the late 1990s, including an overabundance of capital and a substantial rise in buyers' bargaining power, and predictions of industry consolidation. But the rating agency added that today's situation is not identical to that of the 1990s.
“One key difference is that reinsurance buyers today have greater incentives to improve capital efficiency, limiting their need for reinsurance,” Kevin Lee, vice president and senior credit officer of Moody's financial institutions group and author of the report, said in the statement. “Tighter regulatory oversight and the need for better internal governance have pushed insurers to get more mileage out of their capital.”
