September 10. While rating agency Moody’s Investors Service forecasts continued price momentum in reinsurance, VP and Insurance Credit Analyst Helena Kingsley-Tomkins explained that rising capacity is going to limit increases.
It’s testament to the current strength of the global reinsurance market that capacity continues to rise, with both traditional and alternative or ILS capacity both seen to increase in recent months.
This strength, in terms of capital, is also partly a function of the rate environment over recent years, as traditional reinsurers are starting to realize the benefits of consecutive renewals that have seen price increases, with their portfolios earning out more strongly, while they have been retaining more risk premium as well.
At the same time, the rate environment has also served to make insurance-linked securities (ILS) increasingly attractive, especially in the catastrophe bond market, resulting in ILS capital increasing.
The market seems to be set for a balancing-act, between rates, growth and capital, which may result in an equilibrium, yet this could eventually set in a return to some softening.