Europe’s big four average net combined ratio from property and casualty (P&C) reinsurance deteriorated to 98.9% from 95.5% a year earlier, with only Munich Re reporting a stronger P&C combined ratio, says Moody’s.
The report suggests that the group’s weaker P&C underwriting performance partly reflects several small to mid-sized natural catastrophe events during the first half of the year.
Munich Re stands out positively, says Moody’s, with a reported combined ratio of 90.5%.
The reinsurer benefited from comparatively moderate natural catastrophe claims, which added 4.9 percentage points to the combined ratio, 3.6 percentage points below the amount the company had budgeted for.
A release of undisclosed size from reserves against large claims also supported Munich Re’s combined ratio, says the report.
However, on average, the big four reported natural catastrophe claims equivalent to 7.4 percentage points of the combined ratio, 0.3% percentage points above budget.
All four companies increased their natural catastrophe claims budgets going into 2022, reflecting the rising frequency and severity of such events.
The big four’s reported catastrophe claims bill may understate the true impact of such events during the first half, suggests Moody’s.
Both Hannover and SCOR also disclosed sizeable agriculture claims related to droughts in Brazil, but did not categorise them as catastrophe losses.
Reported claims related to Russia’s invasion of Ukraine remain moderate, says the report, although the final claims bill from the conflict remains highly uncertain.
On average, Ukraine-related claims added 2.1 percentage points to the peer group’s combined ratio during H1, ranging from 1.3 for Munich Re to 3.2 for Hannover Re.
Both Hannover Re and Munich Re added additional P&C reinsurance claims reserves in the second quarter, says the report, whereas SCOR and Swiss Re left reserves unchanged from Q1.
Moody’s notes that none of the four reinsurers has set aside material reserves for potential losses related to the confiscation of leased aeroplanes in Russia.
Claims from this source could be significant, but would likely be contested.
The reinsurers’ “normalised” P&C combined ratios, excluding losses related to Ukraine and assuming nat cat losses in line with budgets, rose to 96.6% on average in H1 2022 from 95.8% a year earlier.
Moody’s affirms that this shows that their underlying underwriting profitability is deteriorating but remains strong.