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The outlook for the reinsurance sector has improved, says A.M. Best

by

Andrea Lubeck

December 7, 2018 11:30

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The firm’s rating A.M. Best has upgraded the outlook of the reinsurance sector from negative to stable. The stability of the rate environment in reinsurance of damage and the overall stability of the life reinsurance explain this change on the part of the agency.

The firm’s rating notes that climate change will continue to be a threat to the industry’s global reinsurance over the next few years, especially for reinsurers who are at risk around the world.

A.M. Best reiterates his vision of a reinsurer strong. It must have several characteristics, including a balance sheet and robust product of good operating results of a portfolio of reinsurance is diversified. This reinsurer ideal also makes prudent investments and adopt innovations. “The reinsurers who do not have these qualities will be struggling to stay relevant in the industry, to keep the support of their shareholders, and to preserve their independence,” says the agency.

Underwriting discipline more strict help in damage

A.M. Best cited several factors that have led to improving prospects in reinsurance of damages, including a decline in the consumption of capital and the volatility of the results due to extreme weather events and rising interest rates, particularly in the United States. In addition, the company highlights the renewed interest in underwriting discipline more strict, driven by a potential inflation in the cost of claims.

A.M. Best expects that the demand for reinsurance will increase this year because of the economic growth in the United States and on a global scale, in addition to the benefits that reinsurers derive from the tax reform american.

“These factors should provide opportunities for organic growth and improved use of the excess capacity existing, which should improve the pricing of risk in the long term, write the authors of the report. Similarly, an increase in the use of the reinsurance resulting from the losses incurred recently by companies primary may also increase demand for reinsurance. “

A.M. Best notes that the areas of cyber risks, insurance and reinsurance, mortgage and other emerging risks grugeront more capacity in the market. This should help to mitigate the imbalance between the supply of and demand for reinsurance, which has caused pressure on the rates for the last ten years, according to the firm.

Life reinsurance is a source of stability

For several years, the reinsurance industry, life is a source of stability for the sector global reinsurance, ” says A.M. Best. This can be explained by the stability of profits “thanks to a diversified product portfolio consisting of products that are sensitive to the interests, of blocks of longevity and mortality, as well as of products related to health,” says the rating agency. The growth opportunities present in emerging markets are also part of the factors of stability of the life reinsurance business.

“In addition, the stable outlook reflects the solid capital position of the reinsurance companies life when it is measured in terms of funding risk-adjusted compared to their liabilities. The companies have sought to optimize their structure in order to minimize the tax obligations resulting difficulties created by the new u.s. law, U.S. Tax Cuts and Jobs Act “, add the analysts.

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