Rating agency Moody’s has downgraded its outlook on the global reinsurance sector from stable to negative.

James Eck, VP senior Credit Officer at Moody’s, said: “Uncertainty around ultimate coronavirus-related losses, along with low interest rates, shrinking reserve releases and more expensive retrocessional coverage will all be a drag on reinsurers’ profitability in the next 12 to 18 months, despite stronger reinsurance pricing.”

He added: “Coronavirus-related losses and other catastrophe events have already depleted the annual catastrophe-loss budgets of many firms.”

Moody’s said the ultimate impact of the coronavirus pandemic on the reinsurance sector was difficult to estimate.

It highlighted the fact that the crisis affects multiple lines of business and geographic regions.

It also said many business interruption coverage issues were yet to be resolved and there are still significant downside risks to the economic recovery.

Looking beyond the pandemic, Moody’s said climate change was a longer-term challenge for the sector.

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