Global reinsurers maintain strong financial standing despite challenges: Fitch
In Fitch Ratings’ latest peer review for large global reinsurers in November 2023, the industry has demonstrated resilience with a consistent strong to very strong capitalisation.
The assessment, based on Fitch’s risk-based Prism Factor-Based Capital Model, indicates that the capital adequacy of all reinsurers in the peer group remained robust as of end-2022.
Despite facing challenges such as elevated large losses primarily from natural catastrophes in 2022, reinsurers showcased a remarkable recovery in earnings.
Most notably, reinsurers reported a significant rise in net income return on equity, averaging between 18 to 21% for the first nine months of 2023.
This rebound can be attributed to factors such as lower natural catastrophe claims, improved pricing, and substantial revenue growth in the property and casualty reinsurance sector.
The report highlights a moderation in financial leverage ratios, ranging from 16% to 33% at the close of 2022. Reinsurers achieved this by financing growth in a challenging market environment through retained earnings.
The impact of the Covid-19 pandemic on excess mortality claims diminished substantially, contributing to improved operating margins in life and health reinsurance.
Additionally, investment income showed a noteworthy improvement, compensating for markdowns on investments, high inflation, and large losses that led to a decline in profits in 2022.
Fitch recognises the top-tier standing of all peers, except for PartnerRe, which is considered to have a ‘Moderate’ company profile compared to its global reinsurance counterparts.
Diversification plays a key role in underpinning the ‘Very Strong’ company profiles of the top-tier reinsurers, reinforcing their global prominence and robust market positions.
Looking ahead, Fitch expects prudent reserving standards to persist, with reinsurers maintaining discipline in setting aside additional reserves in response to mounting risks, particularly from higher inflation.
The peer group includes prominent players such as Hannover Re, Lloyd’s, Munich Re, PartnerRe, SCOR, and Swiss Re.
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