Best’s News & Research Service - December 06, 2019 08:03 AM (EST)
Best’s Market Segment Report: AM Best Maintains Global Reinsurance Market Outlook at Stable
- December 06, 2019 08:03 AM (EST)
Oldwick //BestWire// - AM Best has maintained a market segment outlook of stable on the global reinsurance industry for 2020, citing a stabilized pricing environment—albeit at levels below long-term adequacy—the continuing alignment between traditional and third-party capital and ongoing stability in the global life reinsurance segment.
A new Best’s Market Segment Report, titled, “Market Segment Outlook: Global Reinsurance,” states that although rates in the non-life reinsurance market have improved modestly, pricing has not kept adequate pace with the changing risk dynamics, as illustrated by loss development from events such as hurricanes Irma and Maria and Typhoon Jebi, and potential losses from more-recent events (e.g., Hurricane Dorian). Property catastrophe pricing still is being driven by the availability of third-party capital; however, the increasing interdependence between traditional capacity and third-party capital through joint ventures, retrocession and direct ownership should serve to more closely align return objectives for the market overall.
Third-party capital also represents a benefit in the form of stabilized earnings of rated balance sheets, due to tail risk being assumed by this capital.
Overall market conditions are improving, but AM Best remains concerned about insufficient rate adequacy relating to certain U.S. casualty lines, a steady decline in the benefit of favorable reserve releases and
the pervasive low interest rate environment. The collective effect of these factors requires underwriting discipline, and failure to react to these pressures could adversely affect the segment.
The report outlines other factors that are driving the stable market segment outlook, including:
- AM Best believes alternative third-party capital will hold the line on future return expectations following the recent heavy catastrophe loss years;
- A decline in capital consumption and earnings volatility, due in part to the increased utilization of third-party capital in retrocessionaire programs;
- Greater emphasis on underwriting discipline due to pressure on interest rates and potential slower economic growth globally;
- Improving pricing momentum driven by higher loss costs, coupled with lower loss reserve redundancies;
- Increased demand for non-life reinsurance due to primary companies’ recent loss experience, as well as new risk transfer opportunities and mergers and acquisitions;
- Stable operating performance among life reinsurers, which continue to maintain defensible market positions and offer services beyond risk transfer that create hurdles for new entrants.
To access the full copy of the overall global reinsurance briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=292334 .
Separate briefings on the non-life and life reinsurance segments can be viewed at:
To view a video with AM Best Associate Director Scott Mangan about the global reinsurance market segment outlook, please visit http://www.ambest.com/v.asp?v=globalreoutlook1219 .
AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.