The reinsurance market will likely be more “rational” over the near term, with third-party capital investors continuing to be an influential presence, says AM Best.

Reinsurers faced a challenging 2018 following an even more challenging 2017, and AM Best said the issue of loss creep has become a recurring theme.

“Typhoon Jebi, California wildfires and Hurricanes Florence and Michael caused above-average insured losses even as insurers and reinsurers were hoping for a respite after 2017,” the agency said in its annual reinsurance sector commentary.

In 2018, the global reinsurance combined ratio was 102.3%, an improvement from 110.1% in 2017, the ratings agency calculated.

AM Best upgraded its outlook for the global reinsurance sector from negative to stable in December, saying the non-life pricing environment had stabilised, albeit at levels remaining below long-term adequacy. A better alignment of risk and return through partnerships between third-party capital and traditional reinsurers was also noted.

In its latest report, the agency said mortgage reinsurance appeared to be an attractive option as reinsurers look to diversify into profitable areas.

Global reinsurers are also finding new growth opportunities in Latin America, where economies that have met or exceeded reinsurance market expectations in Chile, Colombia, and Peru were somewhat offsetting poorer outcomes in Brazil, Mexico, and Argentina.

Swiss Re regained the top spot from Munich Re in AM Best’s listing of the world’s 50 largest reinsurers.