Reinsurers must maintain discipline to hold on to favourable fundamentals and keep ahead of plentiful risks, said S&P Global Ratings (S&P) credit analyst Taoufik Gharib.
In a report titled "Global Reinsurers Must Maintain Discipline To Cement Strong Performance Amid Casualty Risks," published yesterday, S&P notes that reinsurers delivered a strong operating performance in 2023, benefiting from strong pricing in the property and property catastrophe short-tail lines, together with solid investment income.
Pricing in these lines is peaking in 2024, after years of rate increases and the structural changes of 2023, including stricter and more favourable terms and conditions and risk repricing, said Mr Gharib.
These profitable dynamics persist this year, though short-tail lines' pricing has given some ground as last year's earnings and recovering asset values have bolstered reinsurers' capital positions and boosted their risk appetite.
S&P's stable view of the global reinsurance industry reflects a long upward trek from the difficult conditions of just a few years ago, says the report.
However, casualty reserves remain a key risk as several reinsurers report adverse developments in certain US casualty lines related to the problematic 2014-2019 underwriting years. And while the reinsurance industry dodged most of the elevated natural catastrophe losses in 2023 and the first half of 2024, it remains exposed to potential massive and severe catastrophe losses.