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Global reinsurance outlook stable despite cat losses: S&P

Global reinsurance outlook stable despite cat losses: S&P

Despite high catastrophe losses in 2011, the outlook for the global reinsurance sector remains stable, Standard & Poor's Corp. in London said Wednesday.

The global reinsurance industry likely will post a combined ratio of 110% to 115% for 2011, up from its previous estimate of 105% to 110%. That increase, said Standard & Poor's Corp.'s Ratings Services unit in London, is due largely to losses incurred from flooding in Thailand, as well as increased loss estimates from other catastrophes, S&P said.

Still, the reinsurance industry holds surplus capital, and its enterprise risk management capabilities are strong compared with the wider insurance industry, S&P said.

While some companies improved their capital position last year, reinsurers that began this year with capital 5% to 10% lower than that at the start of last year may experience negative rating actions, S&P noted.

While there were rate increases on some lines of business, the reinsurance market cannot be characterized as “hard,” S&P said.

Pricing changes for reinsurance have been fragmented, the rating agency said, with loss-free property catastrophe and marine and energy programs experiencing rate increases of about 5% to 10% on average. Property treaties that experienced losses during 2011 saw larger rate hikes, though these varied by region, it said.