Global: Stable outlook for reinsurance sector
Source: Middle East Insurance Review | Oct 2023
S&P Global Ratings has revised its view of the global reinsurance sector to stable from negative, according to “Global Reinsurance Stabilizes As Green Shoots Emerge In Underwriting,” published last month.
“During the 2023 renewals, much-needed structural changes in reinsurance underwriting, including tighter terms and conditions and repricing of risk, resulted in the hardest market in decades in short-tail lines, shifting pricing power back to reinsurers,” said S&P Global Ratings credit analyst Taoufik Gharib.
The ratings agency has changed its view of the global reinsurance sector to stable from negative because of expectations it will earn its cost of capital in 2023-2024, based on favourable property/casualty reinsurance pricing conditions, pre-pandemic earnings levels in life reinsurance and increasing net investment income.
S&P expects these green shoots will take root and help address industry challenges. “Reinsurers have had to quickly adapt to evolving conditions amid more frequent and severe natural disasters and an abundance of unprecedented economic and geopolitical events. High inflation, COVID-19 and the Russia-Ukraine conflict have had untimely negative effects on an already overburdened sector,” added the report.
Meanwhile, mark-to-market losses eroded aggregate capital buffers for the reinsurance sector to a position just redundant at the ‘AA’ confidence level at year-end 2022, but some of those losses are beginning to unwind and improving operating results should sustain the industry’s capital adequacy. M