AM Best, an agency specializing in credit ratings and financial data products and services for the insurance industry, has maintained a stable market segment outlook for global reinsurance.
According to the firm’s report accessed by Nairametrics, both negative and positive factors were put into consideration to arrive at a stable outlook report.
The report states that the outlook remains stable in the light of pricing momentum, growing demand and manageable pandemic-related mortality rates, as well as other positive and negative factors.
Highlights of the report
The report states that the enhanced underwriting discipline, alongside substantial cumulative rate increase, has improved underwriting opportunities for almost all reinsurers, adding that the increase in demand for reinsurance capacity has allowed smaller reinsurers a greater role than they have in recent memory.
It stated, “The flight to quality continues in the form of rated and regulated balance sheets offering purchasers peace of mind with regards to how they manage their own risks.”
Positive factors necessitating stable outlook
- Ongoing positive pricing momentum driven by rising loss cost inflation, natural catastrophe activity and historically low investment returns.
- Enhanced market discipline, including tighter terms and conditions driven by uncertain economic environment and climate-related catastrophic event.
- Growing demand for reinsurance capacity as primary carriers look for stable result and capital efficiency in an uncertain environment.
- Wariness from the third party capital after several years of significant property catastrophe event, as well as commodity and labour market surges and near term inflation.
- A life reinsurance market concentrated in a few well-capitalised companies, which partially mitigates competitive pressure.
- Manageable Covid-19 pandemic related mortality experience despite negative development in 2021.
Negative factors necessitating stable outlook
- Historically low-interest rates on fixed income investment are usually below loss cost inflation.
- Adverse loss reverse development in casualty lines of business affected by disruption in the global supply chain and labour shortage issue.
- Significant property catastrophe activity driven in part by climate trend along with the rise of secondary peril, raising challenges with respect to accurate modelling.
- Losses and expenses for property lines of business due to sustained social inflation.
What this means
- A positive market segment outlook indicates that AM Best expects market trends to have a positive influence on companies operating in the market over the next 12 months.
- A negative market segment outlook indicates that AM Best expects market trends to have a negative influence on companies operating in the market over the next 12 months.
- A stable market segment outlook indicates that AM Best expects market trends to have a neutral influence on companies operating in that market segment over the next 12 months.