View this article online: https://www.claimsjournal.com/news/international/2005/10/11/60699.htm
Standard & Poor’s Ratings Services has published its quarterly analysis of the leading European insurers, entitled “Industry Report Card: European Insurance.” S&P found that positive trends in the European insurance market are continuing and said the impact of losses associated with Katrina and Rita on the sector will be modest, although there will be other medium-term consequences.
“The positive trends in the sector are driven by strong non-life underwriting profits and a steady recovery in demand for long-term savings and financial protection products,” said S&P. The rating agency also said it “recognizes that the industry has responded positively to the softening of the cycle, with managements rebuilding capital, reducing costs, and focusing on appropriate pricing and risk selection.”
“Larger players have emerged with increased market share in each of the primary markets,” noted S&P credit analyst Hans Wright. “The resulting scale delivers lower unit costs and pricing power in some markets.”
S&P restated its opinion that Katrina will become the largest single claims event ever for the global insurance industry. It also noted that, as a result, it has “put Swiss Re, Lloyd’s, and Aspen on CreditWatch with negative implications in the aftermath of the catastrophe events, as well as some U.S. and Bermudian companies.”
“However,” S&P also stressed that “based on current information, other European insurance ratings look likely to be unaffected by Katrina- and Rita-related losses. In addition, harder pricing will help the non-life sector to protect margins in an increasingly competitive market. An area where the storms will force a re-evaluation for insurers is in their net retentions, limits, and reinstatement positions in relation to catastrophes.”
“We expect overall reinsurance capacity to be tighter in 2006, at the same time as primary insurers are seeking to increase protections,” Wright continued. “Given the global nature of reinsurance, the subsequent increased cost of such cover is likely to be shared in Europe as well as in the U.S.”
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