Best’s Reinsurance Report Sees Strong Capitalization in a ‘Soft Market’

September 9, 2008

A special report on the reinsurance industry from A.M. Best indicates that “the global reinsurance sector should remain profitable in 2008.” However, Best added that it “believes results will reflect more accurately market trends as margins are expected to moderate.

“While industry balance sheets are strong, recent history shows that soft casualty markets can inflict pain on required capital and catastrophes can remove massive amounts of capital quickly.”

Best also said that it “views 2008 as an important year, as it can influence the market for years to come.”

The report cited the following significant reinsurance developments:
— Top 35 Reinsurers – Two of Bermuda’s “Class of 2005” made the list for thefirst time. The top five reinsurers were unchanged from 2006.
— Nonlife Renewal Trends – Property pricing fell at about double-digit rates for U.S. business. Casualty pricing was falling more gradually though some primary writers cut rates to gain market share.
— Insurance-Linked Securities – Issuance exceeded $7.3 billion in 2007, a record. Softer prices may lead to fewer deals in 2008.
— Life Reinsurance – Longevity and investment risk are among the few avenues to growth.
— U.S. Reinsurers – First quarter 2008 underwriting results deteriorated with sustained competitive pressures.
— Bermuda – Established players, maturing class of 2001 and recent class of 2005 entrants continue to influence the global industry.
— Europe – Reinsurers may be the main beneficiaries as companies seek relief from higher capital requirements under Solvency II.
— Lloyd’s and the London Market – The market cycle and investment market volatility make 2008 a challenging year.
— Asia/Pacific — Capitalization will remain stable, but reinsurers with high equity exposure will have more volatile results.

BestWeek subscribers can download a PDF copy of all full special reports or a combination of the report and all related spreadsheet files of the report data at no charge at:

Nonsubscribers can visit for pricing information or call customer service for more information at (908) 439-2200, ext. 5742.

Source: A.M. Best Co. –

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