Analysts at S&P Global Ratings say the global reinsurance sector won’t earn its cost of capital in 2020, just as it has struggled to do so in the past three years.
Prospectively, the ratings agency says it could reconsider its negative view of the sector at the point that it believes the sector may earn its cost of capital, which is not expected to happen before 2021 at the earliest.
S&P has also maintained its negative view on global reinsurance and is expecting to take additional negative rating actions on reinsurers over the next 12 months.
As of August 31, 17% of ratings on the top 40 reinsurers carry a negative outlook.
The top 20 global reinsurers reported around $12 billion in COVID-19 losses year-to-date and S&P is forecasting this cohort to generate a combined ratio of between 103% and 108% in 2020 and 97%-101% in 2021.
Meanwhile, S&P says life reinsurers are facing higher mortality losses caused by the pandemic, but the impact is manageable.
Property and casualty reinsurance pricing has been hardening during the past 18 months in reaction to natural catastrophe and pandemic losses, as well as alternative capital and retrocession capacity constraints.