Reinsurance profitability attracts capital, but damages prospects: Fitch
Monday, 05 04 2015, Category: Insurance and Reinsurance, Country: World
Reinsurance companies are in a vicious circle. With losses remaining low reinsurers report a profitable result, which has the effect of attracting more capital, which in turn deteriorates market conditions, but with no serious losses results continue to be attractive to investors.
This vicious circle is creating a negative feedback loop, that is gradually worsening market conditions and putting traditional reinsurance companies under increasing strain.
But they keep reporting relatively attractive results, profits remain high, capital keeps being returned and for many of the newer investors in the space the total return a reinsurer can generate is a very attractive number, despite market conditions.
In a new report Fitch Ratings discusses this vicious circle, saying; “Reinsurers’ profitable results continue to attract capital to the sector, leading to deteriorating reinsurance market conditions and recent accelerated industry consolidation.