European Big Four benefiting from hard reinsurance market conditions: AM Best

The European Big Four are benefiting from the hard reinsurance market conditions evident during the 2023 renewals with improved pricing and terms and conditions across reinsurance lines of business and geographies, as per a recent AM Best report.

According to the rating agency, higher inflation expectations are reflected in pricing, attachment points and updated asset values.

“Munich Re, Swiss Re and Hannover Re are aiming for targeted growth in property catastrophe reinsurance business, supported by improved conditions, but continue to have limited appetite for frequency layers and aggregate covers,” AM Best explained.

The firm continued, “On the other hand, SCOR, the smallest of the European Big Four, has reduced its natural catastrophe exposure by 14% at the 1.1. 2023 renewal. This follows a reduction of 21% in 2022.”

The rating agency’s report also noted that the Big Four are aiming for growth in specialty segments, where it says price increases achieved since 2018 “allow for good returns.”

Commenting on this, Mathilde Jakobsen, senior director, analytics, AM Best, said, “The growth in these lines is not purely opportunistic, but also aimed at achieving increased levels of diversification and in turn more stable earnings.

“Within specialty lines, the appetites for different types of business varies, but generally there is more caution around risks associated with cyber, war and recession, given the potential for a systemic loss.”

Meanwhile, AM Best observed there is evidence of the reinsurers taking a more cautious approach to casualty business at the 1 January 2023 renewals.

The rating agency went on, “Casualty performance is affected by the prospect of higher inflation for longer, combined with social inflation and increases in motor frequency, particularly in the US.

“Going forward, carriers are likely to pursue selective growth in this segment, given the challenging market dynamic.”

Turning to life, AM Best highlighted that the pandemic has underlined the significant exposure of the composite to US mortality trends. Thus, in response, the reinsurers are “seeking further growth in other regions and products to create more balanced portfolios,” according to the firm.

The rating agency concluded, “Overall, the reinsurers generally see good opportunities in the life and health segment, and aim to benefit from the increased customer demand in life and health protection, higher mortality premium rates post-pandemic losses, and the benefit of higher interest rates.”

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