Global reinsurers' underwriting results deteriorated in the first half of 2014 due to increased non-cat property losses and a higher underlying run-rate loss ratio.
This is according to a newly-published Fitch Ratings report, which found that results were still profitable due to continued manageable catastrophe-related losses and sustained favourable loss reserve development.
The group of reinsurers that Fitch tracks generated a calendar-year reinsurance combined ratio of 87.4 percent in 1H14, up from 85.9 percent for the comparable half-year earlier and 85.5 percent at year-end.
The weaker results partially reflect an increase in non-catastrophe property losses that have hit several reinsurers, echoing a shift in business mix by traditional reinsurers away from the property catastrophe business. This historically has the highest margins, as competitive market pressures have pushed property catastrophe premium rates to inadequate levels.
Shareholders' equity showed a solid 13.9 percent increase over its 1H13 position and growth of 5.2 percent since year-end 2013. Fitch says that the adverse changes in the unrealised investment gain/loss position on fixed maturities during 2013 have largely reversed or turned favourable for non-life reinsurers in 1H14, relieving some of the pressure from anaemic premium growth.
Fitch's global reinsurance sector outlook is negative, as the fundamentals of the reinsurance sector have deteriorated with declining premium pricing and weakening of terms and conditions across a wide range of lines.
Fitch views current market conditions as unlikely to improve in the near term given the continuing competitive reinsurance market environment.
Fitch, reinsurance, results, pressure, report, catastrophe losses