Global reinsurance rates are too low to sustain profitability, according to ratings agency AM Best. It says most reinsurers have made underwriting profits over the past two years, but rates have weakened in several lines this year.

London-based analyst Jose Sanchez-Crespo told Reactions magazine that the recent hurricane losses in the US will cause the overall US reinsurance market to report an underwriting loss for 2004.

Profitability will be held back worldwide by reserve increases related to asbestos and environmental matters, and as a result long-term profitability for the reinsurance industry will be weak.

Meanwhile, market leaders Munich Re and Swiss Re are reportedly cutting prices to compete for business, despite claiming that they are determined to keep rates high.

Reinsurers are meeting this week in Monte Carlo for the annual Reinsurance Rendezvous. Leading reinsurers say they will accept shrinking sales in return for profitable business. Whether that information is filtering down to underwriters is not certain.

According to one industry heavyweight, reinsurers have already tried to win new contracts across a range of risks and countries by offering lower rates.