Standard & Poor’s (S&P) says North American reinsurers face a “negative” outlook, with rate increases in the global reinsurance market failing to stem the downward pressure on ratings. S&P says the outlook on the reinsurance sector remains negative for the sixth successive year.

“Despite further price increases in the January 2003 renewal season, the market continues to suffer from diminished quality of capital, reduced financial flexibility, prior-year liabilities, the overhang of reinsurance recoverables, and the likelihood that many companies’ operating performance will fall short of expectations,” credit analyst Laline Carvalho said in New York.

The report says reinsurers have had a difficult time capitalising on the hard market conditions of recent years. “Although participants need to rebuild and restructure their capital bases and put in place foundations to reduce future loss volatility, the ease of entry for new players and increased competition in the market have dampened the ability of existing players to recover.”