AM Best have assessed the global reinsurance market to be ‘Stable’ in 2021, as the industry overall has fared the pandemic reasonably well given the extraordinary circumstances we all faced.
Following a year of increased business interruption claims, some of which are still yet to be paid out, there has been a noticeable improvement in market discipline, as reinsurers have made efforts to tighten their terms and conditions throughout the latest renewal period. However, reinsurers have been warned not to be too eager to label certain risks as ‘uninsurable’ in order to stay relevant in the wider economy, as sectors such as travel and leisure will need to be incentivised to continue with their insurance policies with further Covid-19 related restrictions looming.
Improvements in the industry have been offset by the rise in new reinsurance vehicles which have continued appearing across the market, particularly in Bermuda, which has seen underwriting capacity decline and forced prices down.
Overall, the industry has shown a mix of positive and negative trends over the last year which have justified the ‘Stable’ rating. As a hardy industry which has weathered numerous challenging circumstances in recent years, reinsurers have managed to offset profit losses and keep their balance sheets afloat.
After several years of struggling to meet their cost of capital, key players are seen by analysts as starting to turn the corner. However, considerable uncertainty about sizable COVID-related claims reserves— most of them incurred but not reported (IBNR)—which will take years to develop, remains.