A market reset by global reinsurers designed to de-risk portfolios, realign relationships with primary carriers and improve pricing generated strong technical results for the segment in 2023, according to a new report from ICMIF Supporting Member AM Best.
These efforts have included a much-needed shift away from high-frequency layers, the adoption of tighter contract wording, and a better-defined scope of cover with the combined effect having repositioned reinsurers’ traditional role to focus on providing capital protection to cedents, rather than stabilize earnings.
The Best’s Market Segment Report, “Strong Technical Profits Bolster Momentum for Global Reinsurers” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, health and regional reinsurance markets, will be available during August and September.
AM Best believes that hard pricing conditions in reinsurance are likely to last longer than in previous cycles for several reasons. Chief among those — persistently high claims activity is being driven more by the accumulation of medium-sized losses and secondary perils than by single, major catastrophic events. The report also notes that the global reinsurance segment remains well-capitalized and these companies’ solvency positions have not been under meaningful pressure, apart from unrealized investment losses on fixed-income instruments which have reversed.
“The current hard cycle has not been characterized by capital depletion,” said Carlos Wong-Fupuy, senior director, AM Best. “Unlike previous hard cycles and despite the very attractive pricing environment, new company formations have not materialized, particularly in the property catastrophe space. Disappointing results during the previous, prolonged soft market deterred potential new investors.”
Following the market dislocation during the January 2023 renewals—after the uncertainty caused by Hurricane Ian just a few months earlier—AM Best observed an unequivocal change confirming the current hard market conditions. While benchmarking of reinsurers across the globe is now being challenged by the adoption of IFRS 17 accounting standards, the segment continues to expand and is producing return on equity at levels well in excess of their cost of capital. Meanwhile, combined ratios show very strong profit margins, more than offsetting concerns about adverse reserve development on certain legacy books of business, in particular U.S. casualty.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=345543
A video discussion of this report also is available at http://www.ambest.com/v.asp?v=ambglobalre924&AltSrc=182
Rendez-Vous de Septembre in Monte Carlo
ICMIF members are invited to attend AM Best’s annual reinsurance market briefing at Rendez-Vous de Septembre (RVS) on Sunday 8 September 2024 at 10:15 a.m. (CEST) in Monte Carlo. Click here for more information on the event.
For future global reinsurance reports ahead of Rendez-Vous de Septembre, please visit Best’s Research.
AM Best, in partnership with ICMIF, are also pleased to again host the ICMIF Monaco Mutuelle annual cocktail reception during the 2024 Rendez-Vous, on Tuesday 10 September 2024, at the Salon Gustave (AM Best Garden), Hermitage Hotel.
ICMIF Monaco Mutuelle has become an established event at RVS, providing a unique chance for (re)insurance executives from purpose-driven, mutual/cooperative and other member-owned insurers to meet and network with peers from our sector.
AM Best Europe Insurance Market & Methodology Briefings – London
Finally, AM Best invites ICMIF members to join its 2024 Europe Insurance Market & Methodology Briefings in London, UK, on Thursday 7 November 2024.
This year’s insurance market briefing will see AM Best rating analysts and industry leaders presenting and discussing their analysis of and perspectives on the insurance industry in times of increased uncertainty. The guest keynote presentation for the 2024 edition of this conference series will be delivered by Paul Brand, Group CEO, Convex.
AM Best is also pleased to be hosting an innovation exhibition alongside the conference this year.
Click here for more information and to register to attend.
