Competition is increasing among reinsurers is heating up, according to rating agency Standard & Poor’s report.
The rating agency has found that premiums are on the decline and third-party capital is fuelling excess capacity with reinsurers’ financial strength being threatened.
To combat the effect on businesses, global reinsurers are seeking more-profitable markets and are tweaking their investment strategies to see positive returns.
Smaller firms are merging to gain scale, but reinsurers are still sensitive to changes, found the rating agency.
Standard & Poor’s found that the trend of insurance companies seeking to optimise their reinsurance spending as their purchasing decisions are made at the group level, rather than at the operating unit level, seems to be accelerating.
This approach, according to the agency, “reduces an insurer’s need to use a larger number of reinsurers for protection and consequently smaller, less-diversified reinsurers will feel pressure on their market positions”.
The findings are based on Standard & Poor’s assessment of 23 global reinsurers, which share capital adequacy and competitive positions.
