A.M. Best Maintains Stable Outlook on Global Reinsurance Segment

A.M. Best has maintained a stable outlook for the global reinsurance segment, citing price increases driven by rising loss cost inflation; reinsurers' enhanced market discipline, including tighter terms and conditions; and growing demand for reinsurance capacity.

A Best's Market Segment Report titled "Market Segment Outlook: Global Reinsurance" notes that the growing demand for reinsurance is being bolstered by primary insurers looking for stable results and capital efficiency in an uncertain environment.

The report also notes some negative factors facing reinsurers, such as historically low interest rates on fixed-income investments that are in most cases below loss cost inflation and adverse loss reserve development in casualty business lines as a result of social inflation.

Best said it expects reinsurance prices to increase for most lines of business at January 1 renewals and into 2022, though at a slower pace than over the past few years.

"Unfavorable loss cost trends and high catastrophe activity continue to dampen returns on capital, which should keep the industry focused on the need to push for more rate increases," Greg Dickerson, associate director at A.M. Best, said in a statement.

The rating agency noted that social inflation concerns continue to prompt significant price increases in casualty reinsurance lines, and some of the same issues might be making their way into property lines. The trend has been most apparent in post-catastrophe claims settlements, Best said, with claims inflation exceeding normally expected levels due to surges in demand as well as shortages of labor and materials needed to complete repairs.

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