Global reinsurance sector remains stable: A.M. Best
Reprints
The outlook for the global reinsurance sector remains stable, rating agency A.M. Best Co. Inc. said Monday.
The sector has benefited from “strong risk-adjusted capitalization, judicious enterprise risk management practices and a relatively stable pricing environment across a broadening spectrum of business classes,” Best said in a statement.
These factors could help sustain the sector's overall financial position over the longer term despite turbulent global macroeconomic conditions, the rating agency said.
Best said that disciplined underwriting practices had helped reinsurers offset a continued deterioration in investment income.
The rating agency said that, after a series of large catastrophes in 2011, for the first nine months of 2012 reinsurers rebounded to produce average returns on equity in the low double digits.
And despite the catastrophes that occurred during the fourth quarter of the year, including Superstorm Sandy, “reinsurers are still well positioned to put forward an acceptable level of underwriting and overall profit for the full year,” Best said in the statement.
U.S. and Bermuda-based reinsurers are well capitalized and able to absorb significant losses, Best said.
However, Best said the recent stabilization in reinsurance pricing may be short-lived.
“While Superstorm Sandy had little effect on pricing going into the January renewal, some regional accounts that were impacted did experience price increases,” Best said in the statement. “Furthermore, while reserve releases have helped to bolster profits and will likely continue to do so, this crutch will provide less and less support over time,” Best added.
The continued low interest rate environment, however, “appears to be reinforcing a focus on underwriting discipline,” Best said.
Read Next
-
Natural catastrophes caused $65B in insured losses in 2012: Munich Re
Natural catastrophes caused an estimated $65 billion in insured losses — the bulk of which were in the United States — last year, according to an analysis released Thursday by Munich Reinsurance Co.
Related Stories
-
Natural catastrophes caused $65B in insured losses in 2012: Munich Re
-
Reinsurance rate hikes limited to loss-affected areas: Guy Carpenter
-
Marine reinsurance rates rise amid generally stable market: Willis Re
