The financial results of the best EU reinsurers will be assessed in 2024 – Fitch | Insurance business America
Four giants well positioned for 2024
reinsurance
By Kenneth Araullo
Fitch Ratings has highlighted the exceptional financial performance of Europe’s leading reinsurers in 2023 and highlighted their ability to strengthen their reserves and balance sheets, which should improve their ratings through 2024.
In its latest report, the agency looks at the cohort – consisting of Munich Re (AA/Stable rating), Swiss Re (A+/Positive), Hannover Re (AA-/Stable) and SCOR SE (A+/Stable) – and is also in favor of a has set itself up for a robust year, but predicts a plateau in reinsurers’ margins by 2024.
These reinsurers recorded a strong average return on equity of 19% at the end of 2023, double the rate at the end of 2022. This increase was largely driven by significantly higher pricing and improved terms and conditions, as well as a reduction in natural catastrophe losses, resulting in the average combined ratio in property and casualty reinsurance falling to 90% – an improvement of nine percentage points year-on-year.
Additionally, the life and health reinsurance (L&H) segment posted higher profits due to a significant decline in excess mortality claims, while investment results were strengthened by higher recurring income and positive fair value adjustments.
Due to the favorable underwriting margins in property insurance, the four reinsurers have created additional reserves for the liability lines. This strategic move not only strengthens the resilience of the balance sheet, but also provides the flexibility to balance earnings over time, thereby strengthening its creditworthiness. Despite higher shareholder payouts, capital adequacy remains robust in these companies.
A closer look at the performance of EU reinsurers
Property and casualty reinsurance profitability improved significantly in 2023 for three of the four companies, driven by favorable market conditions, which included higher renewal prices, improved business conditions and reduced natural catastrophe losses.
Munich Re was cited as an exception, reporting a slight deterioration in its combined ratio due to increased caution in reserves. Nevertheless, underwriting margins were among the highest in the group, benefiting from a large and diversified P&C reinsurance portfolio.
SCOR recorded the most significant improvement in the combined ratio, reflecting the extensive corrective actions the company has implemented over the past two years, particularly reducing its exposure to climate-sensitive hazards.
The report expects the reinsurance pricing cycle and reinsurer margins to peak in 2024. Despite a slowdown in risk-adjusted price increases for January 2024 renewals, insurers were able to maintain improved program structures, such as higher retention points as well as favorable terms.
Overall, the financial health and capital adequacy of these leading reinsurers was assessed as very good at the end of 2023, with revenue generation and positive market effects largely offsetting capital deployment for new business and increased capital distributions to shareholders. The slight improvement in financial debt on average also underlines the robust financial position of the sector, it said.
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2024-03-28 15:42:54
www.insurancebusinessmag.com
