Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • August 2016
08

Reinsurers face headwinds from both sides of balance sheets, says S&P

Open-access content Wednesday 24th August 2016 — updated 5.50pm, Wednesday 29th April 2020

Global reinsurers are experiencing challenges from both the asset and liability sides of their balance sheets, according to a report published by Standard and Poor’s (S&P).

2


Lower prices in the property catastrophe and specialty markets continue to affect underwriting income, said the ratings agency. Capital from alternative sources has become more mainstream and is now "a prominent competitor" with traditional reinsurance.

In addition, investment returns are affected by lower interest rates and greater uncertainty in global equity and credit markets. Moreover, emerging risks such as more volatile and extreme weather, along with evolving regulations, are "a strain on reinsurers' profitability".

However, S&P says the reinsurance sector as a whole has strong enterprise risk management (ERM) frameworks, leading to disciplined risk selection, conservative underwriting and investment asset allocation, despite lower returns. 

"We view reinsurers as well-equipped to weather the headwinds they face, as reflected in our broadly stable outlook on the sector," said S&P Global Ratings credit analyst Sridhar Manyem.

The ratings agency also sees reinsurers as "leading the pack" in risk models and have a longer track record for their use than in other sectors. 

"Reinsurers need to manage concentrations of risk that could creep up from various sources and prepare for stress scenarios that are typically at high confidence levels, which requires more reliance on statistical extrapolation than empirical data," said S&P in the report. 

"Modeling therefore takes on more significance for reinsurers' risk selection."

The agency believes reinsurers' senior management and boards generally have more experience with communicating and reporting model results and understand the importance of models' limitations and assumptions. 

Therefore, confidence and experience in using models is also "a key differentiator" for the sector.

However, S&P notes these frameworks and new techniques have not been tested in by events such as Hurricanes Katrina, Rita and Wilma in 2005.

"It remains to be seen how well these frameworks have prepared the industry for the hurdles that are sure to come."

This article appeared in our August 2016 issue of The Actuary.
Click here to view this issue
Filed in:
08
Topics:
Environment

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Underwriting Risk Manager

London (Central)
£85K-£95K + Benefits
Reference
124386

Reserving Manager (Contract)

London (Central)
£1200 - £1400 per day
Reference
124385

Life Actuary - Contract - IFRS 17 Financial Impact

England, London / England, Bristol / North Yorkshire, England
£900 - £1150 per day
Reference
124384
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2022 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ