Moody’s revises global reinsurance outlook to stable

Rating agency Moody’s says it has revised the outlook on the global reinsurance market to stable from negative on the back of favorable underwriting and more stable investment results.While rating agencies have been liberally handing out ratings downgrades over the past two years, Moody’s says the ratings environment should moderate and decisions will be geared more toward individual company balancesheets than overall market conditions. However, the rate notes, the credit profile of the industry is not what it once was, with single-A and Baa ratings the norm for most reinsurers.The industry over 2003 and 2004 has enjoyed a favorable pricing environment, improved terms and conditions and a more stable investment climate. “The business written and earned in the calendar years 2003 and 2004 should be the most profitable business reinsurers have written, and Moody’s expects that the trend in underwriting profitability, barring a large catasrophe, is likely to extend through 2005.”The rater expects reinsurance pricing to remain strong given the lack of capacity still being seen in retrocessional markets. However, the industry continues to be hampered by long-tail legacy issues, notable asbestos. Reserve deficiencies for the 1997-2001 years and asbestos liabilities remain a thorn in the industry’s side. However, reserve charges moving forward should not reach the levels seen in 2002 and 2003.The Bermuda start-ups could play a key role in where the industry is headed. “Moody’s believes that most start-up management teams and their shareholders are focused on sustaining the strong returns that they have realized in their initial years of operation. However, the steadily softening property risk market, and the flattening casualty market in 2004, will likely test these management teams’ ability to maintain underwriting discipline.”