Best upgrades global reinsurance outlook to ‘stable’

A.M. Best Co. Inc. has revised its outlook for the global reinsurance segment to “stable” from “negative,” Oldwick, New Jersey-based Best said Thursday.

Best said that the change “primarily reflects” a pricing environment in the global property/casualty reinsurance segment that has stabilized, “albeit currently at levels still below long-term adequacy,” along with “ongoing stability in the global life reinsurance segment.”

Best said that some of the factors supporting the upward revision include a belief that alternative third-party capital will hold the line on future return expectations following the catastrophe losses incurred in 2017 and 2018; a decline in capital consumption and earnings volatility caused by tail events, due in part to the increased utilization of third-party capital in retro programs, and the growing alignment between traditional and third-party capital; a rising interest rate environment, particularly in the United States, which could lead to alternative investment opportunities for third-party capital; and renewed emphasis on underwriting discipline driven by potential loss cost inflation, coupled with lower loss reserve redundancies.

Best’s upward revision came only a few days after Chicago-based Fitch Ratings Inc. issued a similar upgrade to “stable” from “negative” for the U.S. property/casualty insurance sector.