Fitch Ratings has released a special report on the global reinsurance sector.
The ratings agency has maintained its stable outlook but has issued a warning about cycle management over the next two years.
Chris Waterman, senior director at Fitch's insurance group, said: "Downgrades are likely for reinsurers that underperform relative to their current rating level, and whose business models and franchises suffer materially during a cyclical downturn.
"Fitch typically views significant merger and acquisition activity and expansion beyond core competencies as an indication that reinsurers may be experiencing difficulty coping with cyclical underwriting conditions.
Fitch said the reinsurance sector would find its cycle management strategies tested as it tried to identify lines of business that were no longer technically profitable.
Despite insured losses from the 2005 hurricane season totalling $65bn, the reinsurance sector has remained remarkably resilient, according to Fitch.
Senior director at the agency's insurance group in Chicago, Mark Rouck, said: "Ironically, the reinsurance sector's unprecedented 2005 losses have in many ways left it in a stronger position today than before Hurricanes Katrina, Rita and Wilma hit.
"Reinsurers are modelling their exposures to more severe and frequent catastrophic events, and cedants are retaining more risk due to the price of reinsurance capacity. Additionally reinsurers have trended away from proportional reinsurance covers towards excess of loss protection where they have more control over pricing and coverage."
