Reinsurers likely to merge as pressures mount: Best
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Reinsurers continue to operate in a tough pricing environment, and there will likely be further consolidation in the sector as the soft market continues, according to a report by A.M. Best Co. Inc. released Wednesday.
Market trends, such as low rates, broader terms and conditions, and continued competition from nontraditional reinsurance, will combine with the effect of wider economic trends, such as low interest rates and sluggish global growth, to maintain a continued tough operating environment for reinsurers, according to the report by the Oldwick, New Jersey-based rating agency.
Reinsurance rates generally have been declining for several years, and there have been several mergers in the sector. In addition, some large reinsurers have sought to mitigate deterioration in their core business by creating or expanding primary insurance operations.
Best “continues to believe that several franchises that exist today will be sporting the logo of another brand by the time this soft market has run its full course,” the report said.
While there are signs of increased demand for coverage in areas such as cyber risk and flood insurance, recent evidence of increased demand for reinsurance in traditional lines “cannot necessarily be viewed as a positive, as the motive and profitability of these transactions remain questionable,” the report said.
As a result of the gloomy outlook for reinsurers, Best said it was maintaining its negative outlook for the sector.
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