Favourable price movements for property and casualty (P&C) business and elevated demand for cover saw Europe’s largest reinsurance companies substantially grow their premiums through the first half of 2021, while underwriting margins improved on the prior year period.
As noted by Fitch in its recent note on European reinsurers during H1 2021, all major players reported improved underwriting margins in P&C in the period when compared with the prior year.
The ratings agency attributes this improvement to a “fairly moderate amount of large losses and to risk-adjusted price increases,” which continue to rise after a prolonged soft market cycle.
Within P&C, losses related to the COVID-19 pandemic were minimal as renewed treaties included infectious disease exclusions. At the same time, Fitch notes that the level of IBNR losses recorded in 2020 remained sufficient to cover claims reported in H1 2021.
At Hannover Re, no additional reserves were required within P&C for the pandemic in H1 2021. At SCOR, however, the pandemic had a negative impact of €109 million in H1 2021 on the P&C side of the business.
Swiss Re reported USD 64 million of claims across both property and casualty segments, mostly related to business interruption. Munich Re also reported pandemic losses within P&C, of €201 million, which is in line with corporate guidance.
With the exception of SCOR, Europe’s big four also benefited from below average natural catastrophe claims during the six month period, which helped to boost underwriting margins and bring down combined ratios when compared with last year.
But while P&C benefited from a reduced pandemic impact, the life and health (L&H) side of the business continued to suffer as higher-than-expected excess mortality, notably in the UK, the US, Latin America, South Africa, and India, drove weaker results in L&H reinsurance for all of the big four.
Although, Fitch does expect this impact to reduce over the second half of 2021 as a result of the global vaccination effort.
Despite ongoing losses within L&H reinsurance from the pandemic, stronger underwriting results in P&C more than offset this, leading to the return on equity (ROE) improving sharply in the period.
“The four major European reinsurers are in good shape to digest a potentially high level of natural catastrophe claims in 2H21 as earnings and capital were very strong in 1H21,” said Robert Mazzuoli, Director, Fitch Ratings.
