Pricing pressure hit reinsurance stocks in 2014
Stocks for publicly traded reinsurance companies (including the four large European ones) performed well below the overall market through the third quarter of 2014, driven in part by the increased volatility in the overall equity markets and amplified by continued concerns over the increasing competitive pressures on reinsurance pricing, terms and conditions, a report by AM Best has revealed.
Of the 20 publicly traded reinsurers examined, just one stock performed better than the overall market and 10 stocks have trended in positive territory thus far in 2014. Overall, average stock returns this year are flat compared with year-end 2013 and the market's total return of 6.7% for the same period, according to this latest Best's Special Report titled, "Global Re Stocks Underperform As Catastrophe Prices Decline".
Despite the low level of losses and continued favourable reserve releases from prior years, pricing pressures for catastrophe business continued to overshadow the prospects of this sector during the third quarter, the report explained.
“During the first nine months of 2014, reinsurance companies saw catastrophe price declines of 20% in some cases (more pronounced in the US). The dramatic price declines this year reflect the ongoing lack of market changing losses, as well as increased retentions by ceding companies and the inflow of capital (reinsurance capacity) from the capital markets, largely in the form of insurance-linked securities,” the report said.
