DNCs Coll(F)usion GPShip Strzok an IceberGowdy says:
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This is not surprising, given that the industry has enjoyed profits over 10 years due to a dearth of Nat Cat losses, and more than adequate (excess?) capital.
One aspect of the negative outlook that was mentioned is competition by ILSs and Cat Bonds, which is still growing, despite the multi-cat year. There will be investors looking for higher risk and higher yield opportunities until interest rates and RORs rise enough to compete with ILSs.
One aspect of the seemingly lower acceptable ROR on reinsurers is their diversification into other industries; e.g. primary insurance and other financial industries. The AMBest review may not fully reflect the overall holding company return for a reinsurer in such a group, which provides diversification and reduces variance and thus, expected, acceptable returns.
This is not surprising, given that the industry has enjoyed profits over 10 years due to a dearth of Nat Cat losses, and more than adequate (excess?) capital.
One aspect of the negative outlook that was mentioned is competition by ILSs and Cat Bonds, which is still growing, despite the multi-cat year. There will be investors looking for higher risk and higher yield opportunities until interest rates and RORs rise enough to compete with ILSs.
One aspect of the seemingly lower acceptable ROR on reinsurers is their diversification into other industries; e.g. primary insurance and other financial industries. The AMBest review may not fully reflect the overall holding company return for a reinsurer in such a group, which provides diversification and reduces variance and thus, expected, acceptable returns.