A special report from A.M. Best notes that “for publicly traded reinsurance companies, stock prices ended the first quarter of 2015 well above the overall market, driven by the continued benign loss environment and strong performance by the largest four European companies.”
Best said that of the 18 publicly traded worldwide reinsurers (including the four top European players), “just one had a negative performance during the first quarter of 2015, and just two performed worse than the overall market.
In addition the report states “that the return during the first quarter of 2015 of all followed public companies was an average share price increase of 8.3 percent versus the market total return of 0.4 percent for the same time period. The dismal return for the market has been marked by increased volatility and constant speculation of when the Federal Reserve will start increasing interest rates.”
There are, however, storm clouds on the horizon. Best’s report states that “regardless of the low level of losses and continued favorable reserve releases from prior years, pricing pressures for catastrophe business was well evident for all of 2014 and it continued during the Jan. 1 renewal.
“In 2014, $8.8 billion was issued in catastrophe bonds alone, representing a 15 percent growth from 2013. Thus far in 2015, $4.0 billion in catastrophe bonds have been issued. Given the current market environment, reinsurance and retro pricings are expected to remain under pressure going forward. The current reinsurance market remains a ‘buyers’ market and rates, terms and conditions continue to be under pressure impacting company results.”
Best also points out that “companies continue to execute on their share repurchase plans as capital positions remain very strong. Although most companies remain selective in underwriting given the lack of attractive pricing in some lines of business, it is expected that 2015 will remain challenging for reinsurers given the continued price declines.
“At Jan.1 2015, and April 1, 2015, renewals, pricing continued to decline in the double digits and commissions continued to go up in the low- to mid-single digits. The expectation remains that reinsurance pricing overall will remain under pressure in 2015 given continued pressures from alternative capital and the lack of any price changing event over the past few years.”
A full copy of the report is available.
Source: A.M. Best
Topics Reinsurance
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