Rate declines are reducing in Europe, claims Fitch
Underwriting in the European reinsurance market remains under pressure but there are signs that rate declines are reducing and pricing is beginning to stabilise in some markets, according to Fitch Ratings.
European reinsurers reported strong underwriting performance in 2016 despite the difficult pricing environment, driven by significant prior year reserve releases and lower-than-expected major losses, the rating agency said.
"However, on a normalised basis, the combined ratios for some of the major European reinsurers breached 100 percent in 2016, indicating that had major loss experience and reserve development been in line with budget, these reinsurers would have made underwriting losses.
"This increase in normalised combined ratios highlights that there has been continued deterioration in wider market conditions, driven by lower reinsurance premium rates feeding through to results, which is making it increasingly difficult for reinsurers to write business at a profit margin that exceeds the cost of capital," Fitch said.
The rating agency added that the January 2017 renewals season showed that despite increased catastrophe losses in 2016, adding 2pp-8pp to reported combined ratios for the major European reinsurers, overall commercial lines reinsurance rates continued to decline into 2017 for both property and casualty segments.
"There were only moderate rate declines in US property casualty business, with much larger reductions in less established markets such as China, the Middle East and Africa. Most major European reinsurers reported an overall reduction in renewed business, supporting the view that the market remains disciplined, although strategic growth in key markets was still targeted."
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