Moody’s assigns ‘stable’ rating outlook to global reinsurance sector

The outlook for the global reinsurance sector remains stable, Moody’s Investor Service says in a new industry outlook.
“Following two years of strong profitability and enhanced risk management processes, the industry’s robust capital position places it on solid footing to confront softening underwriting conditions, the challenges posed by continuing capital market turbulence and the threat of global economic instability,” Moody’s says in a press release.
Pano Karambelas, Moody’s senior analyst and author of the report, observes pricing continues to decline steadily in both property and casualty lines of business. But such price declines generally remain “near or above technical levels,” he says, “as rates have not changed enough to reduce underlying retentions, though we expect that primary carriers have begun to actively evaluate the lower alternative layers for casualty business.”
Moody’s says it continues to view the reinsurance underwriting cycle s the primary determinant of the fundamental credit conditions of the industry. But the industry also “faces the prospect of incremental volatility arising from a number of broad economic perils, including ongoing credit market turbulence and, notably, the impact of inflation on underwriting margins over the medium term.”
Moody’s says “reinsurers will be especially challenged in projecting the impact of inflation on long-tail business.”
The ratings agency goes on to say that firms with significant property portfolios will be exposed to recent price spikes in basic inputs to materials a phenomenon not captured in catastrophe models.