AM Best has maintained its negative outlook for the reinsurance market, citing doubts about the level and sustainability of uplifts in the operating environment.

The ratings agency expects a combined operating ratio of 110% and return on equity of -1% for last year.

“This does not factor in the potential for further adverse loss reserve development (on top of the losses

reported thus far from the recent catastrophes), a scenario that seems probable given the difference between insured losses reported and the various modelling firms’ estimates of what the reported insured losses should be,” AM Best says.

Third-quarter earnings were affected by catastrophe losses from the hurricanes that hit parts of the US and Caribbean, plus California wildfires.

AM Best identifies potential factors that may lift the outlook to positive, including improvement in the global economy, in particular the US following tax reforms, and possible rises in interest rates that will lift reinsurers’ returns.