Kathmandu. AM Best has revised its outlook for the global non-life reinsurance sector from positive to stable, citing a decline in property reinsurance rates and a broad return to normal market conditions.
Speaking at RIMS RiskWorld in Philadelphia, AM Best co-director Dan Hofmeister said pricing in the property sector has fallen significantly and is expected to return to pre-2023 levels. “Despite this, reinsurance companies have often maintained tighter terms and higher attachment points,” Hofmeister said, adding that the rate cuts reflect improved underwriting by primary insurers. This has strengthened the underlying portfolio and eased pressure on reinsurers. ’
High deductibles and low risk, especially for minor disaster events, have shifted more risk back to primary insurers. As a result, reinsurance companies are incurring fewer losses and focusing more on capital conservation.
Reinsurance industry estimates indicate that the catastrophe losses incurred by reinsurance companies have almost halved in recent years. On accident reinsurance, Hofmeister said, “Social inflation and rising litigation costs are impacting the results. Some reinsurance companies are reporting weak reserve growth. ’
According to Hofmeister, the market has different ideas about whether pricing is keeping pace with claim costs. Alternative capital has become an important factor. It is increasingly being used alongside traditional capabilities, especially in property reinsurance. “It’s increased competition and put pressure on pricing,” Hofmeister said. ’
Hofmeister made it clear that the market is unlikely to tighten without a major or sudden event. “Insured losses need to be $100 billion or more to have a significant impact on capital levels,” he said. –Agency
