A.M. Best’s outlook for the reinsurance market segment remains at negative due to the current uncertainty surrounding any improvement in the market environment.
However, the ratings agency does expect a slight improvement in overall market conditions over the near term following the catastrophic events in Q3 2017.
Best’s Briefing, “Market Segment Outlook: Global Reinsurance”, suggested that the market was able to absorb the events of 2017 and balance sheets will remain solid going into the January 2018 renewal season, but Q3 earnings were down on historical trends.
Any near-term market improvement may be relatively short-lived given the present level of excess capacity in the overall market.
A.M. Best estimated a combined ratio of approximately 110 percent and a return on equity of -1 percent for 2017 for A.M. Best’s global reinsurance composite, and a modest average return of equity of approximately 8 percent over five years between 2012 and 2017.
Positive factors such as strengthening global economy, rising cession rates and further merger and acquisition activity could see the rating agency revise the global outlook from negative to stable.
Robert DeRose, senior director at A.M. Best, added: “A potential increase in demand from government risk pools such as the National Flood Insurance Plan in the US, as well as opportunities in cyber, mortgage and other emerging risks should allow for greater utilisation of available market capacity.”
A.M. Best suggested that companies with robust balance sheets, diverse business portfolios, broad geographic scope and advanced distribution capabilities remain better placed to withstand the pressures of the operating environment and to target profitable opportunities when they arise.
