The reinsurance sector faces weak business conditions, even after modest price increases in 2018, says S&P Global Ratings which adds that this view remains unaltered even after it discussed reinsurance pricing and the latest market trends with reinsurers, insurers, brokers, and other market participants at the 62nd "Rendez-Vous de Septembre" in Monte Carlo this year.
S&P says, “We have maintained our stable outlooks on the sector and most of the reinsurers we rate, based on their robust capital adequacy and strong enterprise risk management. The main discussion points this year were related to long-term issues: the pick-up in merger and acquisition (M&A) activities, how reinsurers are adjusting their strategies to remain relevant, the persistence of alternative capital, whether the recent modest reinsurance price increases will carry into 2019, cyber risk, and the sector's reserve adequacy.”
To a lesser extent, the conversation also encompassed recent catastrophe events such as Typhoon Jebi in Japan and Hurricane Florence in the US, says the international rating agency.
“We expect reinsurance pricing to stabilise as we head into 2019, and consider that alternative capital is here to stay.”
S&P also says that many reinsurers are turning to M&A in a bid to remain relevant, and spoke about how reserving policies could lead to greater volatility. Meanwhile, cedants are becoming more aware of how they could be affected by cyber risk and existing policies are being rewritten to more clearly delineate the cyber risk embedded within them.