Supply and demand rule

This outcome will inevitably impact the 2014 and 2015 reinsurers’ results. As a matter of fact, the reinsurance business that has prevailed since the end of the 2008 financial crisis could not withstand too much pressure.

For the rating agencies, neither productivity gains nor the absence of a sufficiently high loss experience could offset reinsurers’ lower premiums. Standard & Poor's has posted a combined result of 95% to 100% in 2014 and 98% to 104% in 2015, while, according to the same agency, return on equity would go down below 10%.

Overcapacity is the market’s second weakness. The good performance reported by reinsurers in recent years results have attracted an influx of investors seeking high returns from the business.

Overcapacity to which is added the so-called alternative assets (catastrophe bonds, securitization, sidecars ...) plays out in favor of insurers.

Finally, to complete the picture, it is necessary to refer to the decline of demand for reinsurance ceding companies that are gradually improving their risk management, not hesitating to increase their retention.

In light of this slightly gloomy situation, major stock markets have started reacting since mid-January by sanctioning many reinsurers’ stocks.