Reinsurance pricing softening, but ratings are stable: S&P
Reinsurance pricing has continued to soften following another unusually benign year for catastrophe losses, according to a new report from Standard & Poor’s (S&P).
The report analysed the January 1, 2016 renewals. Its examination of the underlying operating results showed that the strong year reported by the global reinsurance industry in 2015 was largely based on the low level of catastrophe losses and high level of reserve releases.
Stripping out these two factors, S&P said that the adjusted results support its view that business conditions for the sector remain weak.
Between 50 percent and 60 percent of risks written by global reinsurers come into effect on January 1 each year, so the renewal season generally sets the tone for the whole year.
In a survey S&P carried out over the first quarter, the largest global reinsurers indicated that, in their experience, reinsurance pricing across lines and regions has continued its downward trend into 2016, although the decline was less severe than expected.
This ongoing rate deterioration affects both top and, more importantly, bottom-line results, but other factors also reinforce the weak credit conditions for global reinsurers in 2016, according to S&P.
However, it said the industry continues to benefit from strong capital adequacy.
“We are maintaining our stable ratings outlook on the global reinsurance sector, based on the industry's strong enterprise risk management and near-record levels of capital entering 2016,” said S&P.
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