ICMIF Supporting Member AM Best has maintained its market segment outlook for the global reinsurance segment at stable, citing the presence of highly uncertain market conditions with positive and negative factors offsetting one another.

Chief among the negative drivers is the heightened natural catastrophe activity that continues to test investors’ risk tolerance levels, according to a new Best’s Market Segment Report, titled, “Market Segment Outlook: Global Reinsurance.” This is being compounded by geo-political and economic uncertainty, in addition to growing claims costs. Despite improving pricing trends and tighter terms and conditions, new traditional capital is cautious and remains on the sidelines. Similar constraints are being seen on the insurance-linked securities side of the market, particularly for retrocession capacity.

“While the segment remains well-capitalized, ongoing interest rate hikes and volatile investment markets have materially reduced shareholders’ equity on a market value basis,” said Carlos Wong-Fupuy, senior director, AM Best.

The report cites several offsetting positive factors, including upward pricing momentum and enhanced market discipline, including tighter terms and conditions. The demand for reinsurance capacity continues to grow, as primary insurance carriers seek out stable results and capital efficiency in an uncertain market environment.

Early expectations of reinsurance rate increases started to attract new capital in 2019, in the hopes that natural catastrophe activity would subside and return to average historical levels. That hope has been negated by the devastating Hurricane Ian, estimated to be one of the costliest insured events in recent history. But even without major catastrophic events, the accumulation of small to medium-sized events has had a material impact on claims ratios, sometimes at unexpected times of the year.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=362424.

To view a video with AM Best Senior Director Carlos Wong-Fupuy on the global reinsurance segment outlook, please visit http://www.ambest.com/v.asp?v=ambreoutlook1122&AltSrc=182.

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.