6 September 2018 11:30
Photo : Freepik
The firm’s rating S&P believes that reinsurers are struggling to cover the cost of capital in 2018 and 2019, with their profits, she said in a report. In 2017, the reinsurance sector has recorded its worst performance in the capital in more than 13 years, says S&P. it was 1.2 %, 6.3% below the cost of capital of the sector.
The company justified these results by the rising interest rates and the volatility caused by the high catastrophe losses. In addition, despite the optimism of the reinsurers, the rate increases during periods of renewal have been more modest than expected.
“The profitability of reinsurers is hampered by competitive pressures persisted in the underwriting cycle in the property and casualty insurance and low returns on investment,” argue the authors of the report.
S&P believes that the return on capital will rise between 6 and 8 % by the end of the year 2018. The increase in the cost of capital will be modest and will remain in the range of 7% to 8%.
The prospects of credit rating in danger
The rating outlooks of S&P could be negative if the profitability of the industry was below the cost of capital. Currently, the global outlook on the reinsurance p & c are stable due to the capital adequacy and the ” strong management capabilities, business risk “.
“However, we do not consider the one-time impact of the losses related to hurricanes in the United States as reflecting long-term trends for this type of loss,” says S&P.