Global Reinsurance Industry Sees Positive Outlook with Strong Margins

Analysts at AM Best have upgraded the outlook for global reinsurers, citing “robust” margins supported by disciplined market practices and a lack of new entrants. The current hard market conditions have led to higher margins due to rate increases, higher attachment points, and stricter terms and conditions. Despite expectations of rate increases slowing down, underwriting discipline remains strong, ensuring healthy profit margins to withstand increased loss activity.

Derisking measures implemented in recent years are expected to continue, providing support for margins. Additionally, higher retentions in response to an active claims environment have maintained strong demand for reinsurance. According to AM Best, the current market dynamics differ from previous hard market cycles, with no shortage of available capital.

The industry is experiencing consolidation and a shift towards quality partnerships, discouraging new disruptive entrants. Global incumbents are well-positioned to manage market cycles and exposures effectively, with the flexibility to enter or exit specific market segments based on performance expectations. Despite attractive returns, analysts do not anticipate significant new entrants, as investors are more inclined towards established balance sheets or liquidity-focused structures.

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