London:
The 17 non-life reinsurers monitored by Fitch Ratings posted a significantly improved aggregate reinsurance calendar year combined ratio of 94.5% in 1H21 (consistent with ‘AA’ IFS rating category guidelines). This was down more than 11 pp from 105.9% in 1H20, which included USD6.1 billion of Covid-19 pandemic-related reinsurance losses (11.3pp of earned premiums).
Non-life reinsurance net premiums written (NPW) grew by a substantial 18.5% in 1H21 as prices continue to rise and demand remains strong.
Underwriting performance is poised to further improve in 2022 as premium rate increases take hold.
Life Reinsurers Manage Higher Mortality
Pretax income for life and health reinsurance business improved notably in 1H21, despite an increase in mortality losses from the pandemic to USD2.5 billion in 1H21 (1H20: USD1.3 billion), as investment results rebounded. Net premiums earned (NPE) increased in 1H21 for life and health reinsurers overall, with six of the eight companies reporting higher NPE.
NPE Equity Capital Declines Modestly
Shareholders’ equity decreased 0.5% in 1H21 from end-2020 as underwriting gains were more than offset by unrealised investment losses from a rise in interest rates and accelerated share repurchase activity.
Fitch expects reinsurers to actively manage their very strong capital as they also seek to take advantage of organic growth opportunities.
Premium Rate Hardening Continues
While market pricing at the various 2021 reinsurance renewals was lower than reinsurers expected as rate momentum slowed, reinsurers have continued to secure premium rate increases since mid-2019.
Prices will continue rising into 2022 and beyond as reinsurers exercise discipline and pricing remains inadequate in the face of heightened catastrophes, low interest rates and inflation concerns.