Hardening pricing conditions are creating opportunities for insurers, while catastrophe, specialty lines and some US casualty lines have been showing improvements in pricing and coverage terms, AM Best says.

The ratings agency maintained its outlook for the global reinsurance sector at Stable in April.

“This may seem counter-intuitive during a pandemic, but a number of factors are helping to mitigate the impact of COVID-19,” AM Best says.

“Despite the many challenges arising from COVID-19, offsetting positive factors have created an equilibrium of sorts. Even the pandemic-related challenges have been manageable, below stress-tested thresholds.”

AM Best believes the market hardening must be sustained for long enough to offset the impact of prior underwriting losses, as well as the uncertain impact of COVID-19 which will likely have a long tail due to legal disputes.

Momentum for renewals in the first half of 2020 was strong, though the risk is that the positive market momentum turns out to be short-lived and excess capacity starts expanding again, the ratings agency says.

It sees growing uncertainty about claims reserve development associated with property catastrophe events in prior years, and business interruption and casualty lines owing to the pandemic.

For the non-life reinsurance segment, robust risk-adjusted capitalisation, with significant excess capital, has positioned reinsurers to absorb both underwriting losses and investment volatility resulting from COVID-19.

In life insurance, strongly capitalised companies with advanced modelling capabilities “have shown the ability to withstand a 1-in-200-year mortality event”.

Swiss Re remains AM Best’s top spot on the list of the world’s 50 largest reinsurers, even expanding its lead over runner-up Munich Re.

AM Best will host its annual reinsurance market briefing as a virtual event on September 13.