Standard & Poor's (S&P) today said the world' largest reinsurers have held their resolve and kept price cuts to sensible levels at the 1 January renewal, but the true test of this resolve will not come until the end of the year.
In the ratings agency's biannual report card it said the most potential danger to the market remains the most predictable danger: the cycle.
"Periods of strong profitability have historically been followed by cyclical downswings in pricing to often uneconomic levels," said S&P's credit analyst Stephen Searby. "Despite the current discipline, this danger remains."
The ratings agency said as a result the real test of the industry's resolve would not occur until late 2005.
Searby said: "By and large, pricing still remains above economic levels, albeit lower than 12 months ago.
“Some further slippage in prices is likely, but for the time being the market is behaving in a relatively disciplined manner compared with the same stage in previous cycles.
“The critical issue is whether further declines can be halted in 2006 when prices, on their current downward trajectory, will begin to test the rational levels of returns."
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