News


22.10.12 MONDAY


Sustaining positive earnings will be tough –


one of the biggest challenges facing the industry will be sustaining these   continued low investment returns, stagnating premium pricing and a reduced contribution from prior-year reserves,” says Martyn Street, director, insurance, Fitch Ratings. 


A


know what to do for the best strategically. “The very low level of yields     past three months, lack of clarity concerning the medium-term level of   issues. Consequently, investment and capital allocation decisions have be-


           


come harder to make.” Reinsurers


should deal with


these low yields simply by continu- ing to focus on their core business strategies while avoiding the temp- tation to chase higher yields through increased investment risk, Street believes, and he also notes that the frustration concerning delays to the implementation of Solvency II is understandable, given the human  spent by the industry so far, in antic-   He has a word of warning for companies looking to grow their way


Fitch Ratings on the reinsurance industry  strategy, and they should focus on the basics, says Martyn Street of Fitch Ratings.


Martyn Street, Fitch Ratings


out of their problems by targeting new markets. “The industry’s desire to harness emerging market growth opportunities is likely to present a number of challenges,” Street says. 


respects fundamental, limitations in the industry’s risk knowledge of less developed reinsurance markets. Specifically, improvements will be required in modelling cold-spot locations, while reinsurers will also require a better understanding of the risks they are actually exposed to.”


“The industry’s desire to harness emerging market growth opportunities is likely to present a number of challenges.”


Fitch is, he says, nervous about the effect another big catastrophe loss


could have on the industry—despite the positive way in which it dealt with the last one. The rating agency says a single event with an insured   - tor’s rating outlook to ‘negative’. Other factors it is keeping a close eye on include the possibility of pro-


  as this could tempt some reinsurers to take more investment risk, “poten- tially exposing their balance sheets to asset and liability shocks, following a major catastrophe.: 


crisis would be bad for the industry, as would a sudden rise in interest   part of the surplus capital held by the sector, through the reversal of un- 


12 | INTELLIGENT INSURER —BADEN-BADEN TODAY | Monday October 22 2012 www.intelligentinsurer.com


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