The four large European reinsurers, Munich Re, Swiss Re, Hannover Re, and SCOR, all reported claims from natural catastrophes below budget in the first nine months of 2023 on the back of improved terms and conditions, while higher investment returns also supported earnings in the period, according to Fitch Ratings.
Higher prices in P&C reinsurance, in particular, drove reported revenues 6% higher on average in 9M 2023, although revenue growth was capped by a shift towards excess-of-loss treaties at the expense of quota-share treaties, Fitch reported.
Together, the four reinsurers reported a strong rise in net income return on equity of 18pp to 21% on average for 9M23, and as P&C reinsurance benefited from lower nat cat claims, better pricing and strong revenue growth, L&H reinsurance also showed a better operating margin on average.
As underwriting improved, so too did the investment performance for the group of European reinsurers. In fact, according to Fitch, the average return on investment of the peer group rose by 110bp to 2.9% in 9M 2023 thanks to higher reinvestment yields and lower investment losses.
Capital adequacy was also very strong for the cohort during the period, as better earnings enabled firms to finance a meaningful risk exposure growth this year.
Fitch says that it has maintained its ‘improving’ fundamental sector outlook for global reinsurance, which it says reflects its view that the sector’s underlying financial performance will continue to improve into 2024.
