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Fitch retains negative outlook for reinsurers

Fitch Ratings has retained its negative credit ratings outlook for the global reinsurance sector adding reinsurers could be forced to operate with weaker capital bases for a prolonged period of time.

The ratings agency says the sector will struggle to replenish capital if reinsurers suffer large catastrophe losses in the current financial market and economic environment.

It says reinsurers lacking underwriting track records or previous histories of meaningful capital markets access could be pressured, while large global reinsurers with a longer underwriting history and track record of accessing capital markets are more likely to be able to withstand and recover from a significant catastrophe loss.

Fitch senior director Mark Rouck says: “This represents a heightened vulnerability for the reinsurance sector. Volatile conditions in capital markets persist, and these continue to create uncertainty over the availability and affordability of new capital in the event of significant need.”

However, Fitch says reinsurers have performed better during the past 12 months than primary insurance companies. It says this is a result of reinsurers’ generally high quality investment portfolios and low asset leverage.

It now believes that the reinsurance sector will be one of the first insurance sectors to return to a stable rating outlook.

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