S&P expresses negative outlook for North American reinsurers
By Our Banking Bureau | 12 Aug 2003
Chennai:
In spite of rate increases in the global reinsurance market,
for the sixth successive year, global rating agency Standard
& Poor's (S&P) ratings services has expressed
a negative outlook for the North American reinsurers.
A
negative outlook signifies that the number of insurer
financial strength ratings lowered over the short- to
medium-term is likely to outweigh those that remain the
same or are raised.
According to S&P's credit analyst Laline Caryalho, the reinsurers suffer from diminished quality of capital, reduced financial flexibility, prior year liabilities, the overhang of reinsurance recoverables, and the likelihood that many companies' operating performance will fall short of expectations.
To
compound the pressure on ratings, reinsurers have had
a difficult time capitalising on the hard market conditions
of recent years. Although participants need to rebuild
and restructure their capital bases and put in place foundations
to reduce future loss volatility, the ease of entry for
new players and increased competition in the market have
dampened the ability of existing players to recover.