Standard & Poor's Ratings Services said this week that it is maintaining its stable outlook on the global reinsurance sector despite the near-record level of catastrophe losses in 2011.
It adds "We therefore do not expect a bias in the direction of any rating actions that we may take this year, either up or down.
We have noted in the past that many companies could fail to meet our earnings expectations for the year, but, on average, we believe that 2011 should be an earnings event for the sector. We have revised our combined ratio estimate to 110-115 for the sector for the year (up from 105-110) due to the losses incurred from the Thai floods in the fourth quarter, as well as loss estimate deterioration on earlier events.
We believe that there will be clear winners and losers from both an earnings and capital perspective. Some companies will have a marked strategic advantage as they have been able to maintain, or even improve, their capital positions through the year. Others, however, are currently operating at levels we consider to be deficient for their current ratings. We maintain our view that we will review reinsurers for potential negative rating action if we see that they began 2012 with capital positions that are 5%-10% lower than at the beginning of 2011 (or they experience losses outside their stated risk thresholds and appear as a negative outlier to peers). We are currently monitoring companies' pre-announcements, and will continue to review the sector as companies publish their annual results in the coming weeks.
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