Chennai: In spite of rate increases in the global reinsurance market, for the sixth successive year, global rating agency Standard & Poor's (S&P) ratings services has expressed a negative outlook for the North American reinsurers.

A negative outlook signifies that the number of insurer financial strength ratings lowered over the short- to medium-term is likely to outweigh those that remain the same or are raised.

According to S&P's credit analyst Laline Caryalho, the reinsurers suffer from diminished quality of capital, reduced financial flexibility, prior year liabilities, the overhang of reinsurance recoverables, and the likelihood that many companies' operating performance will fall short of expectations.

To compound the pressure on ratings, reinsurers have had a difficult time capitalising on the hard market conditions of recent years. Although participants need to rebuild and restructure their capital bases and put in place foundations to reduce future loss volatility, the ease of entry for new players and increased competition in the market have dampened the ability of existing players to recover.