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Global reinsurers stable, well-capitalized, Moody's says

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Global reinsurers stable, well-capitalized, Moody's says

The outlook for the global reinsurance industry remains stable thanks to robust capital positions, but pricing pressure could return in 2019, Moody's analysts said at a London briefing ahead of the reinsurance Rendez-vous in Monte Carlo.

Despite losses from a particularly severe hurricane season in 2017, capital positions at most of the major global reinsurers remain strong, James Eck, vice president - senior credit officer at Moody's, told journalists at the event.

The reinsurance industry is also likely to see more M&A in the near future as firms seek to build scale, diversify and remain competitive.

"Smaller companies will certainly feel the pressure. The question is whether there will be a meeting of minds between buyers and sellers on price," Eck said.

This year has already seen several major insurance deals, such as Axa's pending acquisition of Bermuda-based XL Group Ltd. for $15.3 billion, and Apollo Global Management LLC's proposed acquisition of Aspen Insurance Holdings Ltd., a Bermuda-based insurer/reinsurer.

Technology continues to rise up the agenda for global reinsurance giants, according to Antonello Aquino, associate managing director at Moody's.

"Even for large reinsurers such as Munich Re Co., technology was not really top of the priority list five or 10 years ago," he said during the briefing.

"That is changing. You are not seeing large acquisitions of tech companies by reinsurers, but we are seeing a lot of smaller plays. Reinsurers are making investments here and there, and have their fingers in a lot of different pies. That way they test out which approaches will be successful."

His comments come as Munich Re announced that it is acquiring Boston-based insurtech Relayr Inc., which specializes in the internet of things, for $300 million.

Developments in technology and partnerships with tech start-ups could create growth opportunities for reinsurance companies in the future, as well as driving efficiencies, according to Moody's analysts.

At the moment, the bulk of innovation by tech firms is on the distribution side, and it remains to be seen whether any startups will provide any meaningful competition in terms of underwriting in future, said Brandan Holmes, vice president - senior credit officer at Moody's.