Moody’s foresees deteriorating reinsurance conditions
Moody’s has estimated that tariffs pertining to reinsurance programs are poised to sustain a decline that may be as serious as 5% during 2017. This decrease may affect the year 2018 while the January 2017 renewals showed signs of tariff stabilization. The rating agency explains this trend by the persistence of a surplus of traditional capacities but also by the substantial supply in alternative reinsurance.
The year 2016 was, nonetheless, affected by the most onerous natural catastrophes ever sustained since 2012 with total insured losses attaining approximately 50 billion USD. Moody’s believes that part of this capacity must leave the market in order to allow a turnaround in tariffs. Return on equity of reinsurance companies has sunk, going from 12% in 2013 down to 8.4% in the third quarter of 2016. The current period is therefore favorable to mergers and acquisitions.
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