4 September 2015 News

Divergence in reinsurers reactions to softening market: S&P

There is a divergence in reinsurers' strategic reactions to the softening market when it comes to catastrophe exposure, according to a new report by rating agency Standard & Poor's (S&P).

While most reinsurers have allowed their exposure relative to capital to contract, a few took on more exposure this year, according to the report, entitled Discipline Is Necessary As Reinsurers Adjust Their Exposure To Catastrophe Risk.

The report added that two years of low claims have contributed to the current record high levels of capital in the industry and thus to the recent downward trend in catastrophe risk pricing.

Insured catastrophe losses in 2014 have been estimated at $35 billion, which is around half the ten year average of $64 billion for the global reinsurance industry.

“In our view, an increased focus on catastrophe risk weakens a reinsurer's risk position by increasing volatility in earnings and on the balance sheet,” said the rating agency.

“We consider underwriting profitability in the sector likely to become more vulnerable to natural catastrophes; therefore, we anticipate that operating performance could deteriorate at reinsurers that are more exposed.”

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