Global reinsurance outlook stable, pricing to stagnate: Fitch Ratings

Fitch Ratings reports its outlook for the global reinsurance sector remains stable, with further strengthening of already-strong capitalization and continued premium growth into 2013.

Underwriting and operating trends are expected to support reinsurers’ current ratings over the next one to two years, notes Fitch Ratings’ Report: 2013 Outlook: Global Reinsurance, released on Sept. 3.

“While 2012 earnings are likely to improve, low investment yields and questions over the sustainability of prior-year reserve surpluses will make it more challenging for reinsurers to maintain profitability levels in 2013,” Chris Waterman, managing director in Fitch’s EMEA Insurance rating group, says in a statement.

Price increases are expected to slow, with the supply of reinsurance forecast to exceed demand across most classes in the next 12 months. That said, Fitch takes the view that pricing will remain adequate to support profitability across most reinsurance classes, the statement adds.

“A further catastrophic loss coupled with an inability for reinsurers to replenish lost capital is the most likely threat to the sector’s stable outlook at this time,” says Martyn Street, director in Fitch’s EMEA rating group. “Historically, this has been a rare combination.”

In Fitch’s view, a single loss event of $60 billion would be likely to trigger a sector outlook revision, the statement adds.