Aon’s Reinsurance Aggregate (ARA), which analyses the financial results of 22 companies that underwrite more than 50% of the world’s life/non-life reinsurance premiums, has reported a net combined ratio across the companies of 98.2%.
The ARA notes that most reinsurers continued to report strong property and casualty (P&C) premium growth in the first nine months of 2022, while underwriting results are still benefiting from compounding rate increases and the move to more restrictive coverage terms seen in recent years.
However, elevated levels of major loss activity, the most notable event in the period being Hurricane Ian at the end of September, drove the reported net combined ratio.
Further, The ordinary investment yield dropped again in 2022, with the ARA report stating, “Higher interest rates will be very positive for future earnings, but existing bonds typically need to mature before higher yielding instruments can be purchased, creating a lag in reported results.”
Total investment returns were also heavily impacted by market volatility, as a result, the aggregate return on equity was -0.6% for the ARA companies.
The report noted that reinsurers have generally performed poorly since 2017, adding that over the six-year period to the end of 2022, the ARA has seen an average combined ratio of around 101% and an average return on equity of just under 5%.
This is one of the driving forces behind current underwriting discipline, it says.
2022’s ARA report continued, “Reinsurer valuations were under pressure in the first half of 2022 but moved sharply higher in the final quarter of the year.
“The prospect of better returns has benefitted share prices since Hurricane Ian and these increases are being set against some significant reductions in book value.”
