Jonathan Kent, Business Editor

Reinsurers are now twice as likely to report an underwriting loss as they were in 2012.

That is the view of analysts at Standard & Poor’s Global Ratings, who say falling prices for reinsurance will likely result in more volatile earnings.

Bermuda is a global hub for the property-catastrophe reinsurance business. But traditional reinsurers have faced increasing competition from alternative capital in the form of insurance-linked securities, such as catastrophe bonds. And lower-than-normal catastrophe losses have added to the downward pressure on rates.

“Given that prices are continuing to soften across all lines of business and

global property-catastrophe prices were down about 4 per cent to 6 per cent during 2017 renewals, we consider more-frequent catastrophe losses will become a bigger threat to underwriting profits and capital than they were in the past,” said Charles-Marie Delpuech, S&P Global Ratings analyst.

“Reinsurers are therefore likely to see heightened volatility in earnings, in our view.”

The rating agency’s commentary added: “Those more exposed might have to rethink their appetite for property-catastrophe risk in order to sustain their earnings and capital base, as well as defend their competitive positions.”

S&P said the sector’s strong capital adequacy provided a cushion against major losses, however it added that some reinsurers are more exposed to the risk than others.

“We now consider that seven out of the 20 reinsurers we rate might experience erosion of their capital base due to an annual aggregate loss in the one-in-ten-year return period range in 2017, while in 2016, we did not project any to be at threat,” the rating agency said.

Global reinsurers saw losses from natural disasters rise materially in 2016 to $54 billion from the relatively low levels of $36 billion in 2015.