Gallagher Re says that the capital positions for European (re)insurers have continued to strengthen this year, with the average solvency for those it tracks improving to 235%, up from 222% in H1 2021.
The firm said in a note that this level of sector solvency is comfortably above the c.200% upper end of guidance levels, providing a buffer to absorb potential market volatility and earnings shocks, and a strong base for capital returns.
Meanwhile, it said that reduced asset values had drive a fall in shareholder equity at the midpoint of this year. It said that this had fallen by 22% in the first six months of 2022.
Gallagher Re wrote: “The main driver of this decline was a rise in interest rates which resulted in lower market values of bonds and equities held by global (re)insurers.
“The most impacted companies are those with long duration bond portfolios and high allocation to equities. Capital return through dividends and buybacks also contributed, albeit less significantly, to lower shareholders’ equity.”
It added: “It is worth noting the contrast between capital on an accounting basis and capital adequacy on an economic basis. As noted above, average European solvency has increased at H1 despite significant decreases in shareholders’ equity.”
These remarks from Gallagher Re echo its earlier sentiment that underwriting results were ‘exceptionally strong’ for global reinsurers.
