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Tough times persist for reinsurers

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Reinsurers will struggle to make headway at the next rate renewal season and beyond, according to reports issued ahead of the annual Reinsurance Rendezvous in Monte Carlo.

The continuing flow of alternative capital from investors, who see last year’s unprecedented natural disaster payouts as a temporary blip, is frustrating industry attempts to raise prices.

Fitch Ratings expects investors to further fuel the growth of insurance-linked securities (ILS).

“Increased competition from ILS capacity puts a further squeeze on margins, particularly in well-modelled markets where collateralised reinsurance has significantly increased,” it says.

Fellow ratings agency AM Best has a negative outlook on the sector and believes reinsurers will find no relief on the pricing front while investors see ILS as a viable vehicle.

Reinsurers have entered what AM Best calls the new normal, where returns are less impressive and underwriting and fee income are larger profit contributors.