Standard & Poor's is maintaining its stable outlook on the global reinsurance sector. In a report titled "Outlook On Global Reinsurance Sector Remains Stable" the agency says this reflects its expectation that the number of reinsurer rating downgrades and upgrades will be in relative equilibrium through the remainder of 2006 and into early 2007.
However, behind this veil of stability lies a very dynamic sector, with the last 12 months seeing numerous capital-raising initiatives by existing players, several new company formations, a focus on alternative forms of capital, such as sidecars and cat bonds, and substantially improved pricing and terms and conditions in cat-exposed lines of business.
Reinsurers are not without challenges in coming years, says the report, with the net losses amassed by the sector in 2005 adding one more year to a string of challenging years during the past decade. Concerns over changing weather conditions and the resulting increased storm activity is leading to a substantial tightening of reinsurance and retrocession capacity for property/catastrophe risk, making it difficult for primary companies and reinsurers more reliant on reinsurance and retrocessional coverage to renew their protection programs.
