Four major rating agencies have a negative outlook for the reinsurance sector.

Significant declines in pricing during 2014, and the continuing pressure on pricing this year is one of the factors noted by agency AM Best. It also noted the effect of intensifying competition between companies, which has resulted in thinner underwriting margins.

AM Best, along with fellow rating agencies Fitch, Moody’s and Standard & Poor’s, have placed a negative outlook on the reinsurance sector.

Merger and acquisition trends that started last year will continue with global companies getting larger, believes AM Best, something that has been evident this year with the likes of XL and Catlin, Endurance and Montpelier, and Ace and Chubb among those involved in M&A activities.

Smaller profits and tighter margins is also the rationale behind S&P’s negative outlook on the sector. The agency feels that reinsurers’ capital and earnings positions could be reassessed in view of the downward pressure on pricing.

Those are among the insights included in an industry outlook report by Aon Benfield.

Across US commercial and personal insurance lines, all four agency’s have a stable outlook, with the single exception of AM Best’s negative outlook for commercial lines.

“This is driven by a combination of insurers’ commitment to underwriting discipline and profitability, very strong capitalisation, and conservative investment portfolios despite the low interest rate environment,” notes the Aon report, Evolving Criteria.

Last year both AM Best and S&P issued more upgrades than downgrades, but that trend has reversed this year for AM Best.

An area is coming in for higher scrutiny for AM Best is cyber security.

“It has increased its focus on the emerging trends surrounding cyber security and views it as an essential element of enterprise risk management,” Aon reports.

“Companies are now asked to complete a new section of the SRQ [supplemental rating questionnaire] reflecting what each company is offering and the amount of protection purchased.”

The agency is requesting information on policies, including policy limits and expected losses.