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19/05/2020 17:01

COVID-19 pushes global reinsurers farther out on thin ice

[ET Net News Agency, 19 May 2020] Pandemic-related losses, combined with volatile
capital markets, and lower investment returns, will likely prevent the global reinsurance
sector from meeting S&P Global Ratings' earnings expectations for 2020.
"Once again, the sector will not earn its cost of capital this year, bearing in mind it
has struggled in the past three years to do so due to large natural catastrophe losses and
fierce competition," said S&P's credit analyst Johannes Bender in the report published
today, "COVID-19 Pushes Global Reinsurers Farther Out On Thin Ice; Sector Outlook Revised
To Negative."
The credit rating agency now assumed the global reinsurance sector will deliver a
combined ratio of 101%-105% in 2020, or more if global insured COVID-19 losses accelerate
beyond US$30 billion for the wider (re)insurance sector.
Therefore, S&P revised its sector outlook for global reinsurance to negative from
stable, as it believes business conditions are becoming increasingly more difficult.
"We expect to take negative rating actions on reinsurers whose COVID-19 losses wipe out
their earnings and become a capital event and that in our view won't be able to
sufficiently rebuild capitalization over the next 12 to 24 months, as well as for those
reinsurers that entered 2020 with an already historical weaker operating performance,"
said S&P's credit analyst Taoufik Gharib.
That said, property/casualty reinsurance pricing is hardening, life reinsurance earnings
remain stable so far, and capital for the sector remains robust, though lower, than at
year-end 2019. (KL)

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