Here is yet another report highlighting the pressure that continues to affect the reinsurance industry and is likely to lead to further M&A activity in the sector. Instead of being temporary in nature, the changes that have affected the reinsurance industry (such as excess and alternative capital) seems here to stay.
The long-term business model of the reinsurance industry is being challenged by the inability of reinsurers to command pay-back following the losses of 2017, leading to a likelihood of more sector mergers & acquisitions, according to analysts from Morgan Stanley. ... With the January 2018 renewals having disappointed many, the analysts now forecast the mid-year 2018 renewals will be flat to up +5% at best, while they now expect January 2019 will see rates coming under further pressure. A key reason for the pressure is the glut of capital in the sector, as traditional reinsurers have ample capacity at their disposal despite last year’s catastrophe losses, while the alternative reinsurance sector has grown strongly, following its impressive reload after the hurricanes and wildfires last year.