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Reinsurers showed ‘strong underwriting profitability’ in 2013: A.M. Best


April 4, 2014   by Canadian Underwriter


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Ratings firm A.M. Best Company released Friday a special report on global reinsurance, reporting an improvement in loss ratios in both the Lloyd’s and United States and Bermuda markets and “relatively healthy” investment income in the sector.

“An A.M. Best analysis of the global reinsurer composite showed strong underwriting profitability in 2013 and improvement in overall earnings as the sector benefited from a year of record-low catastrophe losses,” the company stated in its report.

For the composite (which changes over time), net written premiums were $158 billion in 2013, up from $146.6 billion in 2012. All figures are in U.S. currency.

“The increasingly competitive landscape emerged at the January renewal, spurred by the continuous flow of alternative capacity; increased retention among primary insurers; the narrowing of players on existing reinsurance programs; and excess capacity among traditional reinsurers fighting to hold existing positions,” A.M. Best wrote. “While competition was most pronounced on U.S. property catastrophe programs, the overflow of capacity to other business classes and regions exerted pressure across the board.”

The loss ratio for the composite was 56.5% in 2013, down from 60.7% in 2012 and 76.1% in 2011. The five-year average loss ratio, for 2009 through 2013, was 63%.

“The largest insured event was German hailstorms, which totaled $3 billion, followed by Central European floods and multiple tornadoes in the United States,” A.M. Best said of 2013. “Because these insured losses were smaller, the reinsurance segment did not absorb a significant share.”

In 2012, Hurricane Sandy produced an estimated industry loss of $25 billion, A.M. Best noted. “In contrast, 2013 results reflected not one single large event. According to Munich Re, insured catastrophe losses for the entire year totaled only $31 billion.”

A.M. Best broke down the composite into three categories: the Lloyd’s market, U.S./Bermuda (which excludes Berkshire Hathaway) and the “Big Four” European reinsurers, which are Munich Re, Swiss Re, SCOR and Hannover Re.

The loss ratio for the Big Four European reinsurers was 66.1% in both 2012 and 2013, down from 77.5% in 2011. Net written premiums, in non-life, for those four were $64.8 billion in 2013, up from $58.5 billion in 2012.

For the U.S. and Bermuda market, net written premiums in non-life were $59.8 billion in 2013, up from $56.7 billion in 2012. The loss ratio was 55.3% in 2013, down from 63.4% in 2012 and 77.3% in 2011.

For the Lloyd’s reinsurance market, non-life net premiums written were $33.4 billion in 2013, up from $31.4 billion in 2012. The loss ratio was 61.6% in both 2012 and 2013, and 77.5% in 2011.

“Investment income remains a critical component of sector earnings and serves as a ballast during periods of volatile underwriting,” A.M. Best wrote of the global reinsurance market. “The flow of investment earnings has remained relatively healthy thus far, but the level has eroded slowly as fixed-income portfolios roll over into lower-yielding securities.”


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