European reinsurers seeing improved performance
High cat losses have failed to dent the performance of the big European reinsurers, according to Fitch Ratings, which has also reiterated a positive outlook for the sector globally.
The agency reports that the big four of Munich Re, Swiss Re, Hannover and SCOR have seen a strong improvement in earnings in the first nine months of 2021 compared to the same period last year.
“Sharply lower non-life claims related to the coronavirus pandemic more than offset high, and above-budget, natural catastrophe losses,” its commentary states.
“On average, the big four reinsurers showed double-digit premium growth in property and casualty reinsurance in 9M21 on the back of rising prices, rising demand and an increased risk appetite. The growth ambitions have been backed so far in 2021 by a very strong capital adequacy, which was partially achieved by the issuance of subordinated debt,” it added.
The reinsurers’ net income return on equity improved by more than five percentage points on average in the first three quarters compared to 2020.
The sector’s financial performance will also continue to improve in 2022, according to Fitch, driven by rising prices in a hardening market environment and higher economic activity. Consequently, the ratings agency has reiterated its ‘Improving’ fundamental sector outlook for global reinsurance.
Despite this, the sector continues to face challenges. While the reinsurers achieved combined ratios of at least 95%, natural catastrophe losses are expected to stay high. “The increase in severity and frequency of nat cat claims driven by climate change will likely force reinsurers to enlarge their nat cat budgets or reduce their risk exposure,” noted Fitch.
Its analysis also stands in contrast to that published by S&P last month, which reiterated its negative outlook for the sector.
