The global reinsurance market is facing a 'new reality' shaped by abundant capacity from traditional and alternative sources, according to the latest report by rating agency AM Best.
The report, It is Not Your Father’s Reinsurance Market Anymore – The New Reality, named other factors affecting the market include low interest rates and intense competition, which is driving thinner margins as demand for reinsurance cover diminishes.
Robert DeRose, AM Best vice president, said: “The new reality for the reinsurance market looks to be more of an industry where returns are less impressive and underwriting will have to become a larger contributor to profits and returns.
“This will lead to more conservative risk selection, more diversification of product offerings, a wider geographic reach and conservative loss picks.”
AM Best is holding its outlook for the reinsurance sector at negative, according to DeRose, due to the significant ongoing market challenges that will hinder the potential for positive rating actions over time and may translate into negative rating pressures.
AM Best, Robert DeRose, North America