The global reinsurance industry's stable outlook reflects its resilience in the face of a challenging operating environment, says Moody's Investors Service in a new Industry Outlook published today. It also reflects continued underwriting discipline and improvements in risk management, as well as firmer pricing in some primary insurance markets.
The report, "Global Reinsurance Outlook" is now available to download here. Moody's subscribers can access this report via the link provided at the end of this press release.
Moody's notes, however, that the industry faces a number of challenges, including: continued low interest rates, tepid demand given sluggish economic conditions in North America and Europe, and, above all, increased competition from alternative markets.
Over the past year, an estimated $10 billion of new alternative capital has entered the industry, raising the total amount to approximately $44 billion. This influx of capital has had a major impact on current reinsurance market dynamics and pressured property cat pricing, with June/July renewals in the US down 10%-20%.
On balance however, Moody's believes that the adverse effect of any headwinds should remain fairly contained as reinsurers navigate the currently challenging environment and adapt to the evolving marketplace for insurance risk transfer.
"Key strengths of the sector are its resilience and underwriting discipline. Despite immense insured catastrophe losses in 2011 and 2012, and a low interest rate environment that has slashed investment income, the reinsurance sector remained profitable and increased its equity capital", states James Eck, Vice President -- Senior Credit Officer at Moody's .
"While a continued inflow of alternative capital has the potential to alter the core business model of reinsurers, many firms in the sector have been preparing for this eventuality for years through their participation in sidecars and the insurance-linked securities market", adds Mr. Eck.
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