According to a new report from Morgan Stanley, relative to other sub-sectors of insurance, reinsurers “continue to have a solid path”, generating strong ROE, with robust underwriting and steady premium growth.
Morgan Stanley noted that investors have been asking if the firm continues to favour reinsurers going forward, given the slower pricing environment when compared to 2023.
Morgan Stanley said it does, for now, favour reinsurers going forward, however, it explained that a re-evaluation will take place as the hurricane season draws closer.
“From our perspective, reinsurers continue to generate strong ROE, with solid underwriting and steady premium growth. Relative to other sub-sectors of insurance, we believe reinsurers continue to have a solid path,” Morgan Stanley said.
Another related topic in the report was the potential impact of cat bond/ILS issuance on reinsurance pricing.
Morgan Stanley observed that given the current state of the reinsurance market, some investors have additionally asked about capital inflow into the reinsurance market, specifically the ILS and cat bond issuance to date.
On this, the firm said, “Although issuance YTD is relatively high, it is too early to assume the overall capital inflow will have a major impact on reinsurance pricing.
“Further, the average coupon yield for the ILS and cat bond issuance thus far appears to be declining, which could reduce investor appetite when compared to other investment alternatives under the current market conditions.”
