Global reinsurers are expected to report “solid underwritingprofitability” in 2014's first quarter thanks to limitedcatastrophe losses during the period, says Fitch Ratings.

The ratings agency says reinsurers' results should be in linewith results reported in 2013.

The quarter did see some significant weather events, includingsevere winter storms in the U.S. and flooding and winter storms inthe UK, Fitch says. “We believe that losses from these events willbe manageable for the (re)insurance industry, especially as themost-exposed firms are typically large, well-diversified operatorswith the ability to offset losses through other profitable linesand strong capital.”

Fitch adds that reinsurers' share of losses for these eventswill be small since they were not costly enough to triggerinsurers' excess of loss property catastrophe reinsurancetreaties.

“Losses for reinsurers will generally be limited to facultative,per risk and pro rata quota share reinsurance treaties,” saysFitch. “In the case of the U.S., this was partly due to increasedretentions by primary-insurance companies over the last few years,as improved capital positions have allowed insurers to retain morerisk.”

Fitch cites an Insurance Information Institute report notingthat winter 2014 could rank among the top five in U.S. winter-storminsured losses since 1980. I.I.I. said January losses alone totaled at least $1.5 billion. “The significant snowfalland record severe cold resulted in increased claims for bothpersonal- and commercial-lines insurers,” says Fitch, with claimsstemming from roof collapses, power failures, frozen and burstpipes, auto accidents and business interruption. “Once the insuredlosses from all the 2014 winter storms are aggregated, it will pushthe total for the year above the $2 billion in losses registeredfrom winter events in 2013.”

As for the UK floods and winter weather, Fitch says theAssociation of British Insurers estimates £1.1 billion($1.8 billion) in insured losses “due to an historic amount ofrainfall that was also the result of the abnormal strength of thejet stream. While the wind strength of individual storms was notexceptional when compared with others in recent years, the rapidsuccession of storms and accumulated rainfall was.”

Reinsurance rates still under pressure

While underwriting profitability is expected to be strong forthe first quarter, reinsurance pricing remains under pressure dueto an excess of capacity. In an interview with Bloomberg, James Vickers, chairman of brokerWillis Re's international reinsurance unit, said, “It's a prettydifficult situation for reinsurers. The trend seen at the Jan. 1renewals is continuing with no sign of any let-up.”

The Bloomberg article cites pressure from capital-marketinvestors, with Vickers wondering how far rates will eventuallyfall. “How much more do they need to go down before capital marketslose interest and supply gets closer to demand again?” Vickersasks.