Strong financials, continued profit growth, and ongoing industry consolidation, spells a stable outlook for the global reinsurance sector, says New York-based Moody’s Investors Service in a report published Tuesday.

Moody’s outlook for global reinsurers over the next 12 to 18 months remains stable due to the sector’s solid balance sheets, merger and acquisition activity, and rising profits, the report says.

“Good risk management and underwriting discipline mean reinsurers’ balance sheets remain strong, while modest price hikes following the severe natural catastrophe events in 2017 and higher interest rates will bolster profits. Both factors underpin the continued stable outlook on the sector into 2019,” said James Eck, vice president and senior credit officer at Moody’s, in a statement. “Recent M&A, diversification initiatives and corporate strategy shifts have also improved reinsurers’ overall credit profiles.”

Moody’s forecasts that M&A activity in the sector will continue as companies seek to increase their scale, diversify and improve profitability by enhancing capital efficiency and cutting costs. The resulting bigger firms will be stronger and more resilient, the report says, and smaller reinsurers will also feel more pressure to find a larger partner.

Additionally, climate change is becoming a more prominent issue for reinsurers, “as the frequency of weather-related catastrophes increases, presenting opportunities for reinsurers to tap demand growth associated with climate risk adaptation strategies,” the report says.

As well, industry innovation will also enable efficiency improvements and provide growth opportunities. “Advances in technology and partnerships with tech start-ups will allow reinsurers to access untapped markets,” the report says.