Reinsurance 2018 sector outlook negative: Fitch Ratings
Compiled by insurance 24
Fitch Ratings has determined that the 2018 outlook for the reinsurance sector is negative, citing high catastrophe losses, competitive premium rates, and low interest rates worldwide as major factors inits assessment. Fitch observed that market premiums were under negative pressure due to robust capital levels, partly attributable to wide spread alternative forms of capital, and that low interest rates were leadingto disappointing investment yields.
Additionally, normalised combined ratios deteriorated and the sector continues to be exposed to catastrophe losses, meaning reinsurers’ profitability remains under pressure globally.“Competitive market conditions and low investment yields, particularly in the U.S. and U.K., are making it difficult for (re)insurers to earn adequate returns,” said Mark Rouck, Fitch’s Group Credit Officer for
Insurance. Reserve redundancies are also declining and are unlikely to be able to support earnings to the extent that they have in recent years.
Fitch expects the sector’s weak financial performance to persist throughout 2018 despite offsetting factors like strong capital from pre-2017 catastrophe earnings. Conversely, life and health reinsurance was found to be in favourable position, being less exposed to replacement by alternative capital than non-life and showing strong growth opportunities, particularly in Asia.
