The underlying combined ratio improved to 99.8% (2020: 100.7%), which is the first time since 2014 that it has fallen below 100%
A majority of the reinsurers have reported strong results for 2021 with improved capital positions backed up by rising equity markets and retained profitability
Global reinsurance dedicated capital totalled USD 728 billion as of the end of 2021. This is a robust 8.4% growth over the restated USD 672 billion at year-end 2020. Since 2015, total reinsurance dedicated capital has grown by 70% which equates to an average annual pace of 6%.
According to Gallagher Re’s in-depth analysis of a subset of 17 reinsurers shows improvement in underwriting returns on an underlying basis.
The underlying combined ratio improved to 99.8% (2020: 100.7%), which is the first time since 2014 that it has fallen below 100%.
Return on earnings (ROEs) also improved, increasing to 11.4% (2020: 2.7%) and 6.2% (2020: 1.3%) on a reported and underlying basis, respectively.
“While many reinsurers are clearly seeking to grow into the market’s firming conditions, the reduced payouts may also indicate a conservative approach in the midst of recent inflation trends and evolving landscape around natural catastrophe events,” said Gallagher Re.
INDEX companies’ capital grew by 10% to USD 610 billion (2020 re-stated: USD 554 billion) and now represents 84% of the reinsurance industry’s capital base.
Alternative capital followed the same direction and went up by 4%.
“ Including other major regional and local reinsurers, and a pro-rated portion of capital within major groups, we derive an estimate of USD 635 billion (2020 re-stated: USD 581 billion) of capital for the traditional reinsurance market,” said Gallagher Re adding that
a majority of the reinsurers have reported strong results for 2021 with improved capital positions backed up by rising equity markets and retained profitability.
2021 non-life ILS market capacity resumed growing and reached its highest ever level at USD 94 billion, driven by significant growth of the catastrophe bond space. The overall ILS market experienced a period of rebalancing in 2021, with capital allocation shifting away from less liquid ILS structures, with investors instead preferring the transparency and liquidity available through the catastrophe bond instrument.