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FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 02, 2015 07:51 AM (EDT)
The rapid pace of change within the reinsurance sector over the past few years has given way to the permutations of a "new reality" that is being shaped by abundant capacity from traditional and alternative sources, according to A.M. Best's annual special report on the global reinsurance industry.
The Best's Special Report, titled "It is Not Your Father's Reinsurance Market Anymore – The New Reality," also cites additional contributing factors such as low interest rates and intense competition that is driving thinner margins as demand for reinsurance cover diminishes. Many observers now believe that these changes are more structural than the cyclical ones that defined the reinsurance sector's past evolution.
"The new reality for the reinsurance market looks to be more of an industry where returns are less impressive and underwriting will have to become a larger contributor to profits and returns," A.M. Best Vice President Robert DeRose said. "This will lead to more conservative risk selection, more diversification of product offerings, a wider geographic reach and conservative loss picks."
DeRose said that A.M. Best is holding its outlook for the reinsurance sector at negative, citing the significant ongoing market challenges that will hinder the potential for positive rating actions over time and may translate into negative rating pressures.
The cheaper sources of capital entering the reinsurance segment won't necessarily result in winners across the board. Those deemed winners at the end of the day must be able to walk away from bad business, have the capital and expertise to write new, more complex lines of business and provide the products and services that clients want in a global economy, according to the report. Other factors defining success include the ability to both manage the inflow of third-party capital to their own benefit and participate in the new era of consolidation without being left out.
Other highlights from this year's report include:
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=241017 .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.