Reinsurers are reacting differently to soft cat rates: S&P

Reinsurers differ in their reaction to the ongoing soft market in catastrophe exposure, according to a new report by Standard & Poor’s (S&P).

While most reinsurers have allowed their exposure relative to capital to contract, a few took on more exposure this year, according to the report, Discipline Is Necessary As Reinsurers Adjust Their Exposure To Catastrophe Risk.

Two years of low claims have contributed to the current record high levels of capital in the industry, which has led to the recent downward trend in catastrophe risk pricing, according to the data.

Insured catastrophe losses in 2014 are at $35 billion, which is around half the 10-year average of $64 billion for the global reinsurance industry.

“In our view, an increased focus on catastrophe risk weakens a reinsurer's risk position by increasing volatility in earnings and on the balance sheet,” said the rating agency.

“We consider underwriting profitability in the sector likely to become more vulnerable to natural catastrophes; therefore, we anticipate that operating performance could deteriorate at reinsurers that are more exposed.”