Rating firm Standard & Poor's has said the lack of catastrophes across the first nine months of the year and the better than expected performance of the equities market is easing fears over the impact of a major catastrophe on the reinsurance sector.

At the start of thy year there had been concerns that the reinsurance sector would struggle to rebuild balance sheets if there was a major insured man made or natural catastrophe in 2009. However S&P has issued a far more upbeat view of the market after a positive first three quarters of the year for the US and Bermuda reinsurance sector.

In its report "North American Insurance Sectors Are Set To End The Year Better Off Than They Started, But The Overall Outlook Remains Negative," the firm said the reinsurers had been bolstered by their investment returns which had exceeded the conservative estimates released in January.

It added: “U.S. and Bermudian reinsurers continued to post strong operating performance during the third quarter of 2009 because of limited catastrophe activity and significant unrealised investment gains as a result of continued improvements in the capital markets.

“The solid performance in the quarter contributed to strong operating results in the first nine months of 2009. The sector's stronger equity position, along with slowly increasing liquidity in the capital markets, eases some of Standard & Poor's earlier concerns about the implications of a large catastrophe loss event (of $30 billion or greater) and global reinsurers' potential need—and ability—to access additional funds in the capital markets following such an event.”

The report concluded: “These factors, combined with strong underwriting performance through the first nine months of the year, continue to support our stable outlook on the global reinsurance sector.”

According to S&P personal lines property/casualty insurers generally reported sound fundamentals and sustained earnings power during the first nine months of 2009. Lower catastrophe losses, continued strengthening and stabilization of the financial markets, and improved investment portfolios all contributed to the healthier results compared with the first nine months of 2008.

It warned however, “difficult conditions persist” with lower premium volumes and tougher competition.

“Standard & Poor's believes that because of solid management, most personal lines insurers are well positioned to weather the current uncertainties and difficulties,” It added.

The big losers however were the US life firms which have seen asset values hit badly by the fall in equity values and it is the life sector which is at the heart of S&P’s decision to keep a negative view on the US market as a whole.