Reinsurance News

Demand for non-life reinsurance to increase in 2019: A.M. Best

11th December 2018 - Author: Matt Sheehan

Demand for non-life reinsurance is expected to increase over 2019, according to A.M. Best, due primarily to factors such as the return of U.S economic growth, as well as global growth and benefits from the U.S federal tax reform.

market growthAnalysts at A.M. Best believe these conditions will provide opportunities for organic growth and improved utilisation of existing excess capacity, which should improve long-term risk pricing.

Similarly, an increase in reinsurance utilisation following primary carriers’ recent catastrophe losses may also give rise to further reinsurance demand.

Finally, the rating agency pointed to growth in demand from government risk pools such as the National Flood Insurance Program (NFIP) in the U.S, as well as opportunities in cyber, mortgage insurance and reinsurance, and other emerging risks that should allow for greater use of available market capacity.

Taken together, A.M. Best claims that these factors should help attenuate the long-term imbalance between reinsurance supply and demand that has caused pricing pressure over the last decade.

Tremor - The modern way to place reinsurance

The analysis came alongside A.M. Best’s overall 2019 outlook for the reinsurance industry, which the firm revised from negative to stable, driven by what it views as the convergence of traditional and third-party capital among non-life players.

Analysts also predicted that the non-life reinsurance business model will continue to evolve as traditional companies embrace more efficient forms of capital by retroceding risk (particularly tail risk), by aligning risk with the proper form of capital, and by expanding product and distribution capabilities.

Reinsurers who can accommodate alternative capital will thereby enhance their relevance with clients and investors and garner the ability to earn low-risk, fee-based income in the process.

A.M. Best added that it continues to define a strong reinsurance company as one with a robust risk-adjusted balance sheet that can be relevant to alternative capital; that generates sustainable returns from diversified portfolios; has prudent investment management capabilities; and embraces innovation.

Reinsurers who lack these characteristics will struggle to remain relevant to the industry, analysts warned, and may not be able to maintain the support of shareholders or preserve their independence.

Print Friendly, PDF & Email

Recent Reinsurance News