A.M. Best Special Report: Global Re Stocks Underperform As Catastrophe Prices Decline

OLDWICK, N.J.--()--Stocks for publicly traded reinsurance companies (including the four large European ones) performed well below the overall market through the third quarter of 2014, driven in part by the increased volatility in the overall equity markets and amplified by continued concerns over the increasing competitive pressures on reinsurance pricing, terms and conditions. Of the 20 publicly traded reinsurers examined, just one stock has performed better than the overall market and 10 stocks have trended in positive territory thus far in 2014. Overall, average stock returns this year are flat compared with year-end 2013 and the market’s total return of 6.7% for the same period, according to this latest Best’s Special Report titled, “Global Re Stocks Underperform As Catastrophe Prices Decline.”

Despite the low level of losses and continued favorable reserve releases from prior years, pricing pressures for catastrophe business continued to overshadow the prospects of this sector during the third quarter. During the first nine months of 2014, reinsurance companies saw catastrophe price declines of 20% in some cases (more pronounced in the United States). The dramatic price declines this year reflect the ongoing lack of market changing losses, as well as increased retentions by ceding companies and the inflow of capital (reinsurance capacity) from the capital markets, largely in the form of insurance-linked securities.

Alternative capacity provided by the capital markets has remained a focus in 2014, and A.M. Best expects this to persist. In 2013, there was USD 7.6 billion in cat bonds issued versus USD 6.15 billion issued in 2012. Thus far in 2014, the market has seen close to USD 6.3 billion in cat bonds come into the market. Investors’ unabated interest in cat bonds, particularly for U.S. risks, and the lack of any major losses over the past few years continue to drive down prices for global risks, including European wind, U.S. hurricane and Japanese cat exposures.

For a full copy of this special report, please visit: http://www3.ambest.com/bestweek/purchase.asp?record_code=231635.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Mariza Costa, 908-439-2200, ext. 5308
Financial Analyst
mariza.costa@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Mariza Costa, 908-439-2200, ext. 5308
Financial Analyst
mariza.costa@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com