AM Best has warned that efficient cycle management is the key to the reinsurance industry keeping its financial strength as the market begins to soften.
The ratings company said the industry was facing a key test from the 2005 renewal season in terms of how it reacted in practice to pricing pressure from cedants.
While the cost of catastrophe losses seen in 2004 would slow the descent into a soft market, AM Best said, the trend was already well established.
The ratings company highlighted particular concerns about weakening in terms and conditions, as this had typically been the leading indicator of a return to uneconomic underwriting in casualty and liability lines.
