The global equities downturn and continuing capital shortages are being felt at the top end of the industry, with local reinsurer Swiss Re Australia copping a ratings downgrade yesterday. Standard & Poor’s (S&P) has lowed the ratings of Swiss Re Australia to AA from AA+ following similar action taken against its global reinsurer parent, Swiss Reinsurance.

S&P Credit Analyst Stephen Searby says the downgrade “primarily reflects a revaluation by S&P of reinsurance industry risk and Swiss Re’s position within that industry following the relative under-performance in its non-life underwriting profitability”. In other words, the once-invincible reinsurer isn’t making enough money from general insurance, which doesn’t sound promising for anyone predicting lower premiums anytime soon.

S&P was also sceptical of Swiss Re’s “slower than expected recovery in earnings” and the impact this may have on the group’s ability to fully replenish capital during the current hard phase of the cycle. But it expects Swiss Re “will maintain or improve its business position in the life reinsurance market over the longer term as it exports the rollout of a well-established and successful business model into new territories”.