A.M. Best maintained its negative outlook on the global reinsurance sector as compressed investment yields and underwriting margins continue to put a strain on profitability.

Reinsurers' risk-adjusted returns will continue to be negatively impacted by low rates, unsustainable flow of net favorable loss reserve development, weak investment yields and continued pressure from alternative capital, A.M. Best said in a report. While insurers are generally well-capitalized and can withstand various stress scenarios, some insurers could see this strength erode over time, the rating agency said.

Companies with business and geographic diversification and advanced distribution capabilities are in a better position to withstand the difficult operating environment and can target profitable opportunities, A.M. Best said.