Key challenges facing global reinsurers will drive profits lower, but are unlikely to undermine the current strong levels of capitalization for the majority of carriers over the next 12-to-24 months–subject to normal catastrophe experience, according to Fitch Ratings.

Fitch added that its rating outlook for the global reinsurance industry remains “stable,” based on an expectation that profitability will decline in the sector over the next couple of years–driven by lower levels of underwriting profit, investment income and prior-year reserve releases.

“The relative attractiveness of the reinsurance operating environment has resulted in an intensification of competitive conditions, and prospects for continued strong earnings have diminished for many global reinsurers,” Chris Waterman, managing director in Fitch Ratings' Insurance group in London, said in a statement.