The outlook for global reinsurers is negative because of declining premium prices and increased competition, according to a Fitch Ratings report today.
Its Global reinsurers' 2013 financial results report said the fundamentals of the reinsurance sector had deteriorated and the agency warned that current market conditions were unlikely to improve in the near term.
Life reinsurers saw their profits drop despite a 5.8% increase in net premiums earned. The pre-tax income of the life insurance operations tracked by Fitch fell by 28.1% compared with a year earlier as several reinsurers' results were affected by adverse performance of group risk business in the Australian market.
But falling profits in the life sector contrasted with 'solid' underwriting profits generated by non-life reinsurers. This was due to manageable catastrophe-related losses and favourable loss reserves, which helped the industry to improve its underwriting combined ratio to 85.5% in 2013, from 89.3% in 2012.
Fitch said non-life reinsurers had benefited from a quiet Atlantic hurricane season that saw the fewest number of storms since 1982. The industry experienced below-average natural catastrophe insured losses of $31bn in 2013.In the face of these findings, Fitch's rating outlook for the reinsurance sector remains stable. Fitch said it expects to affirm the majority of its current rating for reinsurers over the next 12-24 months. Supporting factors are the continued strength of capitalisation and maintenance of profitable earnings, it said.
However, in the absence of a major catastrophe event, Fitch said the sector's credit profile would deteriorate if the low-yielding investment environment persisted and pricing conditions continued to soften.