Reinsurers taking action against negative credit conditions: S&P

There is a continuing trend for negative credit condition in the global reinsurance sector, according to a new report from Standard & Poor's Ratings Services (S&P).

According to the report, For Reinsurers, An Ever Tougher Competitive Landscape Makes Profits Harder To Find, pricing continues to decline due to increased competition among traditional reinsurers and alternative players, and record high capital levels.

S&P said that these conditions are making it ever more difficult to generate sustainably strong profits. However, it said that this “doesn't mean the industry faces an inevitable round of credit-damaging losses."

The report said: “Our analysis of peer groups within the reinsurance sector confirms that despite these tough conditions, reinsurers are taking defensive actions to protect themselves.

“Given our belief that these actions have been mostly effective and have boosted the industry's resilience, we expect few rating actions in the sector over the next 12 months."

The report claimed that reinsurers that are well capitalised, diversified, and able to offer significant capacity to clients are best positioned to navigate the tricky landscape, as are those that can adapt and remain relevant to their clients should be able to meet return targets.

“Others will struggle to generate returns and defend their competitive position, and they could become takeover targets as the industry further consolidates”, said S&P.