Life insurance remains a good source of diversification for large global reinsurers, says AM Best.
In a Best’s Market Segment Report, the international credit rating agency says that the global life/annuity and health reinsurance segments remain well-capitalised and positioned for robust growth. Claims stemming from elevated mortality have been manageable, and more recently have levelled off, but it has been difficult pinpointing direct causes and future directions.
Property & Casualty
Overall, the outlook for the global reinsurance market is positive, despite an active Atlantic hurricane season. The positive outlook has been driven largely by the tailwind in property reinsurance, with the only major headwind being some uncertainty about casualty business—specifically, rising concerns about US casualty social inflation trends, and to some degree even globally, says AM Best.
According to AM Best, property reinsurance rates and terms have been relatively stable and are unlikely to soften in the coming months, owing to the hurricane activity during this year. Demand for coverage also remains strong, and possibly even growing, due to heightened natural catastrophe loss activity and general economic and political uncertainty.
“Reinsurers’ underwriting margins have improved steadily since 2021, with substantial improvement to rates and terms following the market dislocation in 2023,” said Mr Carlos Wong-Fupuy, senior director, AM Best. “In 2023, the global reinsurance segment generated one of its best years in recent history, with several large reinsurers reporting combined ratios below 90.0 and returns on equity exceeding 20%.”
Higher interest rate yields are also beginning to earn out, increasing investment income and bolstering total returns. However, concerns remain about adverse development in the US casualty segment, with many reinsurers re-evaluating their positions for 2025 renewals.
Hurricanes
While the frequency and magnitude of the 2024 hurricane events were above average, the report notes a fortunate development as many of the events’ paths altered right before landfall, redirecting them to less populated areas.
“Reinsurers expect to bear some losses from Helene and Milton,” said Mr Dan Hofmeister, associate director, AM Best. “We expect the two will have an impact on third- and fourth-quarter earnings, but reinsurers should generally still report profitable full-year results for 2024.”
Despite generally strong operating results in 2023, several reinsurers reported adverse casualty reserve development at year-end. As a result, reinsurers will likely become more selective with their casualty books, which may result in more hardening.