Fitch upbeat for 2022 renewals
Global reinsurer underwriting performance will improve in 2022 as premium rate increases take hold, Fitch Ratings predicted on Monday. Non-life reinsurance net premiums written grew by a substantial 18.5% in the first half of the year, it found, as prices continued to rise and demand remained strong.
Persistent heightened catastrophe losses, continued low interest rates and mounting inflation concerns will support further rate increases, its report forecast. So far, renewals largely ignored pandemic-related losses, it added, but this could change in 2022 with improved clarity around the ultimate losses. In reinsurers’ favour is the fact that communicable disease exclusions remain widespread in property treaties.
Its statement came as 17 non-life reinsurers monitored by the business posted a significantly improved aggregate reinsurance calendar year combined ratio of 94.5% for the first half of 2021. That was down from 105.9% for the same period last year, which included $6.1 billion of Covid-19 pandemic-related reinsurance losses.
Despite the overall optimistic outlook, the ratings agency also noted concerns around deteriorating loss-cost trends, rising social inflation and litigation costs and the pace of the global economic recovery. Moreover, while rate increases were likely to continue at the January 2022 renewals, it noted, this was likely to be at a reduced rate, with high single-digit/low double-digit increases. Nevertheless, European property rates, in particular, could be in line for rises in 2022, given recent increased catastrophe losses there.
According to Fitch, current pricing is still inadequate in the face of rising catastrophes. Global re/insured nat cat losses were a “manageable” $40bn in the first six months of 2021, compared to $35bn in the first half of 2020 and the 10-year average of $33bn. However, July flooding in Europe could add $8bn to catastrophe losses for the second half of the year, with potential additional losses from the active Atlantic hurricane season.
