Global non-life markets are forecast to remain under pressure in 2018 with combined ratios for non-life re/insurers expected to range from low 90s in emerging markets to high 90s in more mature markets, according to S&Ps latest Financial Services outlook report.
The record-level losses of 2017 estimated at between $130 and $150 billion aren’t expected to cause a significant upturn in the non-life re/insurance global market, given the intense competition; “the market’s ability to allocate capital to these lines and regions quickly will likely limit the peak of the pricing upside.”
However, S&P believes catastrophe losses will halt the downwards pricing trends, particularly in the primary and property reinsurance lines, and cause material rate increases in loss affected lines.
To offset profit pressures from increased competition and low interest rates, insurers are likely to look for ways to cut expenses as well as invest in innovation to drive efficiencies in future.
S&P analysts warned re/insurers that after 5 years of benign losses and near misses, the 2017 catastrophes are a “wake-up call to the industry,” adding that regulatory, political, and accounting developments will create a more uncertain environment, in a trend of fragmentation of regulatory oversight and trade policies in many regions.
The protectionist trend comes despite the call for convergence by international organisations like the Financial Standards Board (FSB), the European Insurance and Occupational Pensions Authority (EIOPA) and World Trade Organization (WTO).
However, reinsurance giant Swiss Re is optimistic on non-life premiums, expecting growth of at least 3% annually over the next two years as well as life premiums growth by 4%, with the majority being driven by emerging markets.
Premiums for emerging markets are forecast to rise by 6% to 7%, in real terms annually, over the next two years.
Swiss Re added that the reinsurance sector is “likely to benefit from the adoption of risk-based regulatory regimes in many emerging markets.
“But in certain regions, such as sub-Saharan Africa, some governments have made protectionist moves in favour of local reinsurers or enacted additional collateral requirements for foreign reinsurers, which could dampen both primary insurance and reinsurance premium growth.”
