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[LONDON] Reinsurance prices are likely to fall next year by up to 10 per cent, an analyst at ratings agency Moody's said on Wednesday, but less severely than in the past few years as competition in the sector hurt rates.
Cheaper products, such as catastrophe bonds, have provided an alternative to traditional reinsurance and attracted yield-hungry institutional investors. Low levels of natural catastrophes have also cut enthusiasm to buy reinsurance, industry specialists say.
"Prices will be down, but not as down as in prior years," Stanislas Rouyer, associate managing director at Moody's, told a media briefing. "It's probably single digit on average." Prices fell by 10 per cent or more in 2015.
Mr Rouyer said prices for the alternative forms of reinsurance were starting to reach a floor, leading to a slowing in overall price decreases.
Fitch and Standard & Poor's have also said price falls are likely to be in single digits, ahead of the industry's annual meeting in Monte Carlo next week.
Moody's on Wednesday maintained its negative outlook on the reinsurance sector, citing an oversupply of reinsurance provision and a fall in demand from insurers, who use reinsurance to share the burden of hurricanes and other costly disasters.
Major players in the US$600 billion reinsurance market include Swiss Re and Munich Re.