Wider footprint fundamental for reinsurers: AM Best

A wider footprint and broader scale has become fundamental for reinsurers competing in the current market.

This is according to rating agency AM Best in its latest report on the reinsurance industry.

The report explained that companies will feel the need to become bigger as favourable reserve releases start to diminish and companies are under pressure to deliver underwriting profits.

Merger and acquisition (M&A) activity took centre stage in late 2014 and is expected to continue throughout 2015 as companies realise the need to create a more diversified and global book of business, said the rating agency.

“M&A deals announced over the past few months seem to address the need for greater global scale and diversified product lines and distribution,” said AM Best.

The report also noted that at the January and April renewals, renewal pricing continued to decline in the double digits and commissions continued to go up in the low-to mid-single digits.

AM Best said: “The expectation remains that reinsurance pricing overall will remain under pressure in 2015 given continued pressures from alternative capital and the lack of any price changing event over the past few years.”