Standard & Poor’s cautiously assigns reinsurance sector a “stable” outlook

Standard & Poor’s [S&P’s] is maintaining its stable ratings outlook for the global reinsurance sector, albeit with considerable caution.
“Given the macroeconomic headwind now confronting reinsurers, a continuation of the downward trend in pricing seen thus far in 2008 would likely cause us to revise the sector outlook to negative,” S&P’s commented in a recent report on the U.S. insurance industry.
S&P’s observed reinsurers are now facing similar conditions experienced by the U.S. commercial lines property and casualty sector, which S&P’s downgraded in mid-August to a negative outlook.
S&P’s noted its decision to revise its commercial lines sector outlook reflected its concern “over two issues, the ongoing decline in pricing for commercial lines and decreases in investment income.”
Despite facing similar market conditions, most rated reinsurers currently enjoy a stable outlook, S&P’s added, noting it did not expect to see a significant number of rating changes over the next 12 months.
All the same, S&P’s said outlook revisions for the reinsurance sector appeared likely “as we scrutinize the appropriateness of each reinsurer’s response to the more challenging environment.”
S&P’s also observed “the U.S. personal lines sector’s operating fundamentals “remain solid despite the weaker results, and overall, the outlook on the U.S. personal lines sector remains stable.”