LONDON, Sept 7 Reinsurance premiums could fall
by up to 5 percent next year and may continue to weaken into
2018, pressured by competition in the sector, ratings agency
Moody's said on Wednesday.
Reinsurers act as a financial backstop for insurance
companies, helping them pay for large damage claims from
hurricanes or earthquakes in exchange for part of the premium.
High returns in the sector in comparison with low interest
rates in the developed world have encouraged new players to
compete for reinsurance business. A relatively low number of
major natural catastrophes has also depressed the prices
households and businesses are prepared to pay for protection.
"Prices will continue softening through 2017 and possibly
even 2018," senior Moody's analyst Brandan Holmes told a media
briefing, adding price falls of up to five percent in 2017 would
be similar to declines seen this year.
Holmes' comments echo remarks this week from rival ratings
agencies Fitch and S&P Global.
Low interest rates are also hitting insurers' investment
returns, putting additional pressure on profitability, Moody's
said in a report on Wednesday.
Reinsurers' return on equity averaged 8.6 percent at the end
of June, down from 10.3 percent at the end of 2015, Moody's
Reinsurance industry executives gather in Monte Carlo next
week for their annual meeting.
(Reporting by Carolyn Cohn; Editing by Mark Potter)