[Watch and Read] Optimistic about global reinsurance: AM Best

Reinsurers’ disciplined approach to underwriting boosts the sector, says AM Best’s Carlos Wong Dupuy. 

AM Best’s reaffirmed positive outlook on global reinsurance earlier this year marked a significant turning point after years of challenges. 

Carlos Wong-Fupuy, senior director at AM Best, attributed this shift to reinsurers' proactive steps in recalibrating risk during a video interview with Bermuda:Re+ILS. 

“After several years of continued losses, companies started to de-risk significantly, realigning the risk profiles between reinsurers and primary insurers,” Wong explained. 

The outcome? “Very strong results” from 2021 to 2024, according to Wong, signalling that “this discipline is here to stay.”

Watch the full video interview below.

As a result, AM Best affirmed its positive outlook in November, showing it believes the so-called hard market is likely to endure. 

Investor pressure remains a key factor underpinning the hardening market, Wong noted: “After 2017, companies were producing returns barely meeting their cost of capital, often below it. While that is starting to reverse, it’s still early days.” 

Heightened catastrophe losses are helping to put a floor under prices while a high interest rate environment is ensuring that reinsurers’ fixed income investments are producing a solid return. 

“There’s a significant risk premium in the segment given the volatility observed in previous years,” Wong added.

“Capital is not coming in and we doubt that new entrants will actually disrupt the market.”

Investors value certainty 

Attachment points and terms have become more critical than rates alone and Wong highlighted that “what investors value most is certainty”, citing 2023 results showing combined ratios as low as 90 percent for some companies.

Past hard markets have seen new reinsurers with fresh capital enter the market, but this has not been the case so far. 

Wong acknowledged: “Capital is not coming in and we doubt that new entrants will actually disrupt the market..”

Looking ahead to 2025, Wong expects some rate softening in loss-free areas but predicts stability overall. “The main point is that discipline remains the same. We don’t see that changing,” he stated. 

He also highlighted innovation and technology as areas of optimism, though they come with risks. 

“You don't want to get overexposed in a risk that you don't fully understand,” he said, “so it's about trying to get into those areas cautiously and with the right resources.” 

For deeper insights into casualty trends, ILS dynamics and the industry's evolving challenges, click here to watch the video.

Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.