FITCH Ratings: Reinsurers' earnings at "New Normal"; Sector Outlook Stable

FITCH Ratings has revised on 4 September 2018 its outlook for the global reinsurance sector to stable from negative, on the belief that earnings have settled at a "new normal", with return on capital likely to be more modest but less volatile than before.

The rating agency expects that credit fundamentals in the reinsurance sector will continue to reflect intense pricing competition and low investment yields, which will continue to limit profitability, counterbalanced by very strong capital adequacy, robust risk management and generally solid business profiles.

FITCH believes the growth of the alternative capital sector has altered reinsurance market dynamics, making capacity shortages less likely and the underwriting cycle flatter. This was demonstrated after the large catastrophe losses in 2017, when insurance-linked security (ILS) investors quickly helped to replenish the sector's capital and premium rate increases were modest as a result.

It also considers that "alternative capital is here to stay". Investors have been attracted to the reinsurance sector by the benefit of diversifying away from traditional financial markets, rather than simply searching for higher absolute returns. Rising interest rates are therefore unlikely to lead to an exodus of capital. Indeed, alternative capacity is likely to continue growing in 2019 against a backdrop of significant ILS issuance in 2018 to date. This will keep pressure on reinsurers' margins, particularly in markets with significant collateralized reinsurance, and this year's modest pricing momentum after the 2017 catastrophes is unlikely to continue into 2019.

The sector outlook could return to negative if pressure on pricing becomes severe enough to shift profitability below the cost of capital. A positive sector outlook could result if an unexpected exodus of alternative capital leads to a significant improvement in market pricing dynamics, the agency's press release said.

The report "2019 Outlook: Global Reinsurance" is available here https://www.FITCHratings.com/site/re/10039319

Follow XPRIMM Publications on LinkedIn, for more data on the insurance and financial industry.

Share |

Related articles

Global economic growth is solid but slowing, and emerging Asia will continue to power the insurance market, sigma says

Global premiums are forecast to grow by around 3% annually in 2019 and 2020, mostly driven by the high growth rates in emerging Asia which may be as by three times more than the global average. The economic power shift from west to east will drive insurance sector development to 2020 and beyond. Expanding the boundaries of insurability for corporate intangible assets will be another main growth area for insurers

2018-11-22

Insurance, a key player in building resilience

"The frequency of natural disasters is increasing, and the damage they cause will be greater as the world population becomes more urban and concentrated in areas prone to catastrophe," one of the latest analysis published by Aon under the Global Insurance Market Opportunities titles sates.

2018-11-05

The Insurance Business in Transition to the Cyber-Physical Market

What we generically call "Cyber risk" is, in fact, a family of risks and it is worth observing if there is a commonality in the perception - thus management - of the risk in the academic, risk management, insurance and policymaking communities. The present study found that cyber breach is perceived as "critical" due in part to its own nature and, importantly, in part to the weak understanding of its impact and our preparedness.

2018-07-19

Hail and windstorms cause multi-billion global economic loss in June; draught may be this summer's nightmare for European farmers

Overall, extreme weather events led to a multi-billion dollar economic toll, of which insurers have to pay more than USD 3 billion in claims for US losses alone, the latest edition of Aon's monthly Global Catastrophe Recap report shows. Economic losses in the Central and South-Eastern Europe amounted some hundred million USD, but weather continued also in July, adding extra costs which may also amount to significant sums.

2018-07-11

ON THE MOVE

AIG Life Limited (UK) announces the appointment of a new CEO

AIG Life Limited (UK) announced the appointment of Philip WILLCOCK - the former CEO of AVIVA's Indonesian and Italian ventures - as CEO, subject to regulatory approval, effective March 1, 2019. He will be based in London and will report to Adam WINSLOW, CEO, International, Life & Retirement.

13.12.2018

Sylva de FLUITER takes over as head of UNIQA Re AG

Sylva de FLUITER will take over as head of UNIQA Re AG in Zurich as of 1 January 2019, the Austrian group announced. Until year end she will work hand in hand with long-time Managing Director Hans Uwe MULLER, who will retire after 14 years at UNIQA Re.

12.12.2018

MERCER to name Bala VISWANATHAN Chief Operating Officer

MERCER, the consulting subsidiary of MMC - Marsh & McLennan Companies, announced that Bala VISWANATHAN, CEO of Jardine Lloyd Thompson Group plc (JLT) UK & Ireland Employee Benefits, will join MERCER as Chief Operating Officer.

12.12.2018

TOP EVENT

Reducing the risks in agriculture by using insurance means, discussed in Skopje

On November 1st, an Agricultural insurance conference took place in Skopje, Macedonia, organized by the Insurance Supervision Agency in cooperation with the Ministry of Agriculture, Forestry and Water Economy. Drawing attention to the necessity of reducing the risks in agriculture by using insurance was the event's main purpose.

06.11.2018

IIF 2018 - Insurance in a DIGITAL WORLD

Emmanuel DJENGUE, Innovation Director, Europe - RGAX, Spain is the Keynote Speaker at IIF 2018 - Insurance in a DIGITAL WORLD Conference in Bucharest, on November 27.

05.11.2018

See all