Hesitant capital remains on the sidelines amid losses from property disasters and rising inflation – InsuranceNewsNet

OLDWICK, NJ–(BUSINESS WIRE)–
According to a new AM Best report capturing the views of panelists from a recent reinsurance industry briefing.

The Best Market Segment Report“Hesitant capital had an imminent role to January 1st Reinsurance Renewals,” is based on a briefing earlier this week in which a panel of AM Best analysts and industry executives discussed pricing pressures around the January 1, 2023reinsurance renewal season.

Persistently high levels of losses and the volatility of small and medium-sized natural disasters, coupled with rising inflation and geopolitical concerns, have made property catastrophe exposures a less favorable game for reinsurers. According to AM Best estimates, the reinsurance segment has generated return on equity ratios of around 4 to 5%, in a market where the cost of capital is at least double. This cost of capital is expected to rise further, according to one of the panelists, Carlos Wong-Fupuy, Senior Director, AM Best.

“Despite improving price trends and tighter general conditions, new capital is taking a very cautious approach,” Wong-Fupuy said. “While the market remains well capitalized, it is important to note how capital is being deployed and that significant amounts remain on the margins.”

Wong-Fupuy was joined on the panel by the CEO of Somers Re Liz Cunningham and Aditya Duttpresident of Aeolus Capital Management. Cunningham said property writers have been hit hardest at January 1st renewals, with catastrophe-exposed lines up 50-100% overall. Dutt said some factors influencing capital inflows are beyond the industry’s control, such as rapid changes in interest rates and an estimated 20% decline in stock markets, all in the past 12 months alone. He cited the difference in economic conditions compared to the past 30 years coupled with the increased incidence of major catastrophic events.

Other topics of discussion included the future role of insurance-linked securities in underwriting real estate catastrophe risk, the impact of economic instability on market conditions, and whether pricing and earnings of reinsurance have stabilized enough to persuade new investors and capital to enter the market. AM Best maintains a stable outlook on the global reinsurance segment.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=328290.

To watch the free briefing, go to http://www.ambest.com/conferences/reinsurance2023/index.html.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Based at United Statesthe company does business in more than 100 countries with regional offices in London, amsterdam, dubai, hong kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by AM Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

src=”https://cts.businesswire.com/ct/CT?id=bwnewssty=20230126005674r1sid=acqr8distro=nxlang=en” style=”width:0;height:0″ />

Show source version on businesswire.com: https://www.businesswire.com/news/home/20230126005674/en/

Carlos Wong Fupuy

senior director

+1 908 439 2200 ext. 5344

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200 ext. 5159

[email protected]

Al Slavin
Senior Public Relations Specialist

+1 908 439 2200 ext. 5098

[email protected]

Source: AM Best