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AM Best: Reinsurers Face Potential for Complex Losses

The outlook for the global reinsurance market is rated “stable” by AM Best.
  • David Pilla
  • October 2022

A rapidly changing risk landscape fueled by geopolitical concerns, inflation and a shift away from natural catastrophe exposure among reinsurers is creating opportunities even as reinsurers watch for uncertain conditions, according to AM Best analysts.

Geopolitical and macroeconomic risks are creating greater awareness of coverage needs and the chance to develop new products and services, said Catherine Thomas, senior director, analytics, AM Best, at the Rendez-Vous de Septembre conference in Monte Carlo, Monaco.

The reinsurance market is facing increasing exposure to emerging and intangible risks, said Thomas. Climate and demographic trends can add to a higher potential for significant unanticipated loss accumulations for reinsurers, she said.

On the positive side, the reinsurance market is seeing sustained upward pricing and improved terms and conditions.

Catherine Thomas
AM Best


The outlook for the global reinsurance market is rated “stable” by AM Best but the market has some headwinds and tailwinds, including a more complex risk environment, more risk from secondary perils and emerging risks, said Carlos Wong-Fupuy, senior director, AM Best. Economic uncertainty including inflation, rising interest rates and the risk of recession are also factors in the reinsurance outlook, he said.

The reinsurance market remains well-capitalized and while rates continue to increase, they are doing so at a slower pace, said Wong-Fupuy. New capital also continues to enter the market but with a lower impact than in past cycles, he said.

Another development in the reinsurance market over the past year has been a shift away from the property catastrophe segment, said Wong-Fupuy.

Wong-Fupuy also noted reinsurers are facing increasing challenges in modeling for natural catastrophes and hard-to-model events. In the past, there has been an over-reliance on and complacency with catastrophe risk models as well as a “commoditized” view of risk, said Wong-Fupuy. He added traditional risks are becoming less predictable.

Human behavior and government intervention are having a greater impact on the reinsurance industry, said Wong-Fupuy. He said government restrictions related to COVID-19 and the subsequent business interruption issue are examples. Events including the Russia-Ukraine conflict were not an issue 12 months ago but are becoming significant now, he said. On the positive side, the reinsurance market is seeing sustained upward pricing and improved terms and conditions, said Thomas.

Reserve development is more positive, and shifts in business mix are leading to more stable results, she said, adding underwriting discipline has improved.


David Pilla is a news editor. He can be reached at david.pilla@ambest.com.



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