A.M. Best reports stable outlook for global reinsurance industry in 2011

For the fifth consecutive year, A.M. Best Co. is maintaining a stable outlook in 2011 for the global non-life reinsurance industry.
The current outlook implies the majority of 2011 reinsurer rating actions are likely to be affirmations, with only a modest number of anticipated rating or outlook changes.
“The outlook reflects A.M. Best’s view that the majority of global reinsurers continue to maintain a very strong capitalization position, which should provide sufficient cushion for most companies to withstand the continuing soft reinsurance market that is entering its fifth year,” A.M. Best says in its Global Reinsurance 2011 Outlook.
“Meanwhile, 2010 is proving to be a reasonable year in terms of underwriting performance, bolstered by the absence of a major U.S. hurricane and continued favorable reserve development, which has helped to mitigate losses incurred from a rash of global catastrophes occurring mostly in the first half of the year.”
Top line growth is under pressure, A.M. Best notes, as reinsurers continue to maintain underwriting discipline and ceding companies choose to retain larger shares of their books of business.
“Over the past several years, reinsurers have shifted their focus to underwriting shorter-tailed classes, where pricing has proven to be more attractive, especially given the current investment yield,” A.M. Best notes.
“This discipline, however, is absolutely necessary to mitigate future underwriting losses, which inevitably will emerge from underpriced long-tail casualty classes, and could be compounded by the future threat of inflation.
A.M. Best notes the shrinking demand for reinsurance capacity has necessitated more stringent capital management from reinsurers, which overwhelmingly has been in the form of share repurchases.