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Best maintains negative reinsurance outlook

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Overall reinsurance market conditions should improve slightly over the near term, according to A.M. Best Company Inc. in a Monday Best’s Briefing, Market Segment Outlook: Global Reinsurance.

Despite the chance for improvement, the ratings agency is nonetheless maintaining its negative outlook for the sector, the Briefing said, due to continued uncertainty.    

The main reason for maintaining the negative market outlook for the near term is the “considerable uncertainty surrounding the level and sustainability of any improvement in the reinsurance market’s environment,” Best said.

The ratings agency added it expects a 2017 full-year combined ratio of about 110.0% for the global reinsurance composite.

Losses from third-quarter hurricanes Harvey, Irma and Maria, however, could catalyze a move in the sector’s outlook, Best said.

Although catastrophe losses in 2017 have been estimated in third-quarter earnings reports as high as $100 billion, “the events of 2017 should serve as a catalyst for that improvement,” Best said, adding, “we see some potential positive factors that could favorably impact the reinsurance market over the near term, that may be sufficient cause to revise our market outlook from negative to stable.”

These factors included an improvement in the U.S economic picture and interest rate environment, as well as the increased role of alternative capital in absorbing 2017 catastrophe losses.