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Fitch: LatAm reinsurers face weak demand but capital, profits to remain solid

The Latin American reinsurance sphere will continue to face subdued demand due to slow regional economic growth, soft global market conditions and capital solvency regulations, Fitch Ratings said.

Despite declining prices, regional reinsurers will maintain adequate capitalization and profitability over the next 12 to 18 months, with any revenue declines expected to fall within ranges that current ratings can tolerate, Fitch said. Economic contraction in the country and higher inflation have pressured reinsurance markets, but major reinsurers have been able to adapt due to a strong franchise, market position and deeper knowledge of regional markets.

The rating agency expects to affirm ratings of most Latin American reinsurers, although some highly leveraged companies could see downgrades or have negative outlooks.

However, Fitch noted that reinsurance demand in the region "could improve to some degree, considering that insured catastrophe losses in 2016 almost doubled compared to the previous year, which should further motivate coverage acquisition."