A day after downgrading Bermuda’s reinsurance industry outlook from positive to stable, an AM Best director raised the spectre of it being downgraded even further.

In a briefings call, Greg Dickerson, director, global re analytics, at AM Best said the outlook was unlikely to change for the better in the near future.

“Signs of erosion in market discipline, irrational pricing and relaxation in terms and conditions could result in the outlook being downgraded even more,” Mr Dickerson said.

The outlook has been positive since June 2024.

Mr Dickerson said: “For now, the reinsurance industry is in a pretty healthy place overall, even if we are clearly past the peak of the last hard market cycle in property reinsurance.”

He said it is important to monitor whether reinsurers become victims of their own recent success and become overly aggressive, deploying the capital they have amassed in a market where attractive opportunities are going to become harder to find.

“We also need to watch whether the industry can successfully navigate the complexities of the casualty space,” he said.

The outlook was downgraded largely because of an acceleration in property cat rate during the January 1 renewals season, with pricing down between 10 to 20 per cent on average.

Mr Dickerson could not see any potential catalyst for reversal or bottoming of that trend on the horizon.

On the casualty side, AM Best saw positive pricing momentum persisting.

“It is still fair to ask whether it is keeping pace with loss cost trends, particularly in troubled lines, including commercial auto liability, excess liability, general liability and some others,” Mr Dickerson said. “These continue to be impacted by social inflation and legal system of use, often supported by litigation financing.”

Mr Dickerson did not see signs of that abating any time soon.

Renaud Guidée, the chief executive of Axa XL, was also on the briefings call. He said the supply of capital is on the rise. “Growth is running unabated as well.”

He said the world is becoming a riskier place, with 2025 being the sixth consecutive year of insured global catastrophe losses exceeding $100 billion.

“Our clients need certainty, predictability and visibility,” Mr Guidée said. “They are looking for services of reinsurers to bridge the gap between uncertainty in the world and the certainty they need for the running of their own business.”

He said with both man-made and natural threats increasing, the demand for protection is going only in one direction — up.