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Reinsurer reserve releases expected to drop off


Reserve releases by reinsurers looking to prop up financial results will likely slow in the future, according to a report released Thursday by Standard & Poor’s Corp.

“Going forward, we expect a reduction of reserve releases attributable to natural catastrophe events,” the ratings agency said in its report.

Reinsurers have been relying on reserve releases for years, according to the ratings agency.

“Since the market started softening in 2007, we have observed that some global reinsurers have supported their combined ratio by releasing more of their reserves,” said S&P.

Reinsurers that have released reserves more slowly and retained a larger portion will fare better going forward, the report said.

“We expect those reinsurers that chose to retain prudent reserves for longer to have maintained a cushion on which they could draw. Those that released reserves more quickly, by contrast, may find that they have exhausted their ability to support current reported profits from past reserves,” said S&P.

As for the competitive pressure driving reinsurers to release reserves to improve results, S&P added that it sees “no signs of the trend reversing course in the near future.”

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