US reinsurers see declining loss ratio

Net income for 13 major U.S. reinsurers rose to US$6 billion for the first nine months of 2006, compared to a break-even position during the same period last year, according to Benfield.
The reinsurance and risk intermediary’s U.S. quarterly report revealed the positive result was prompted by a 30-percentage-point fall in the loss ratio. The weighted average combined ratio declined 27.8 percentage points, from 123.8% to 96.1%.
The ratio improved because of the lack of major catastrophe losses and minimal adverse development, the report noted.
Premium levels stabilized at US$26.4 billion, halting a trend of falling premium rates since 2003. Retentions rose as companies took advantage of an attractive rating environment.
The reinsurers’ investment contribution was strong, with an income of US$7.5 billion in the first nine months of 2006. But realized gains were not enough to offset the US$1.76 billion realized loss reported by Swiss Re America; collective losses totaled US$796 million.
“Balance sheet strength has generated a healthy contribution to the Benfield U.S. Quarterly group aggregate bottom line,” said Leon Janeke, an associate with Benfield’s Analysis and Research Team. “The third-quarter results suggest there is scope for further improvement in the combined ratio.”