OLDWICK, N.J.--(BUSINESS WIRE)--Please replace the release dated June 15, 2016 with the following corrected version due to multiple revisions.
The corrected release reads:
A.M. BEST SPECIAL REPORT: GLOBAL REINSURERS CONTINUE TO WITHSTAND CHALLENGING MARKET DYNAMICS
The stock price for publicly traded reinsurance companies, which include the European big four - Swiss Re, Munich Re, SCOR Re and Hannover Re – decreased on average by 0.7% in the first quarter of 2016, far below the 8.3% average increase posted in the first quarter of 2015, according to a new A.M. Best report.
According to the Best’s Special Report, titled, “Global Reinsurers Continue To Withstand Challenging Market Dynamics,” of the 16 publicly traded worldwide reinsurers followed in this report, eight experienced negative stock price movement during the first-quarter 2016, with one insurer’s price basically remaining flat. Three other reinsurers experienced just limited stock price growth. Hedge fund-backed reinsurer Greenlight Re outpaced all the companies with a 16.5% quarterly stock-price increase, showing a rebound from a tumultuous 2015 that saw the company’s share price decline by almost 43%. The less favorable share price movement of the group, on average, was driven by persisting competitive market conditions that have suppressed organic top line premium growth for most reinsurers.
Reinsurers have been dealing with compressed profit margins in recent years, with the pressure on reinsurance pricing fueled by more-than-ample capacity in the market and low catastrophe loss activity; in particular, a third straight quiet Atlantic hurricane season in 2015. However, the Fort McMurray wildfire in Canada and other global weather-related catastrophe activity in the first and second quarters of 2016 have generated more than $10 billion in insured losses and started to reverse the favorable recent catastrophe loss trend, although the reinsured portion of these losses is still well within annual catastrophe budgets.
Due to the hyper-competition for reinsurance opportunities limited in number by the strong balance sheets of primary insurers, portfolios of global reinsurers are being weighted more toward primary business. Pricing for this business is a little more attractive than on the reinsurance side, although increased pressure is mounting in this sector as well. Over the recent term, property pricing pressures have become more acute, even on the primary property side. It remains to be seen how meaningful, if at all, the impact of recent catastrophe losses will be on the primary and reinsurance market for property.
Absent any significant, market-impacting catastrophe event, A.M. Best expects capital to remain abundant over the near term, allowing share repurchases to remain an integral part of companies’ capital management strategies. Reinsurance pricing is expected to be under pressure throughout the remainder of 2016, partly attributable to the impact from more alternative capital in the form of collateralized reinsurance placements and the lack of market-changing events in recent years. With reinsurers’ balance sheet strength still strong and available capital remaining abundant, pricing will likely stay under pressure, with broadening terms and conditions further pressuring results.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=250259.
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