5 June 2019 11:30
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Although it is not yet a tough market, the reinsurance market is firming, notes the firm’s rating S&P Global Ratings. In a recent analysis of the round of renewal of January, April and June, the company notes that, despite rate increases, disappointing in the beginning of the year, the rest of 2019 looks promising.
“After increases in disappointing rates of reinsurance in 2018 and start of 2019, it seemed that no amount of natural catastrophe losses would not be enough to harden the market as a whole. However, during the renewals of April and June of this year, reinsurers have seen green shoots : the rate of disasters on immovable property have increased by 15 % to 25% for the accounts affected by the losses, ” write the analysts.
It is that the reinsurers were counting on the profitability of the u.s. market for catastrophe property to compensate for the poor performance of other regions and sectors of activity, “says S&P. However, the poor results of this first mixed with the “poor performance” of the other sectors of activity have constituted a threat to the profit margins of underwriting and reinsurance companies, their overall profitability and their ability to generate the cost of capital, which forced them to increase their rates.
A gradual growth
S&P notes that the growth rate was gradual rather than sudden in recent years, leading the price of reinsurance, aggregated at the same level as a few years ago, wiping out the losses incurred. This is also the reason why the firm described the market as strengthening. The company expects that the growth rate reaches at least 5 % in the next 12 months if the disaster is in the normal.
Moreover, despite the large losses related to the catastrophes of the past few years, the capacity of reinsurers remains good, according to the firm. However, growth opportunities are limited and the market remains fragmented and highly competitive, stress the analysts.
“All these factors will continue to influence the sector on a prospective basis. But the fundamental question is the following : the green shoots of which have been witnesses reinsurers will they take root and lead to sustained profitability enabling them to earn their capital, or will they fade with time ? Up here, the prospect seems promising “, do they.