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Growth opportunities still exist in reinsurance: J.P. Morgan Cazenove

5th January 2017 - Author: Steve Evans

With the global reinsurance market having just been through another tricky January renewal season, when rates are generally accepted to have fallen and terms expanded further, there are still opportunities for companies to grow their premiums, according to analysts.

Sluggish demand is a factor that has exacerbated the softening of the global reinsurance market in recent years, adding to the pressure of excess capital and insufficient major losses to drain the market of capacity.

But demand still exists in sufficient quantity to enable global reinsurers to grow their premiums, equity analysts at J.P. Morgan Cazenove believe.

“Reinsurance is not a sector typically associated with strong growth,” the analysts explain, adding that despite this the four major European reinsurers (Munich Re, Swiss Re, Hannover Re and SCOR) have between them recorded average premium growth of 8% per annum since 2009.

In a time where demand has been said to be sluggish, as large reinsurance buyers rationalised their programs, consolidated buying at the group level and bought more multi-year coverage, the opportunity to grow clearly exists if you command enough market relevance.

RMS

“We believe that continued growth is possible, even against a P&C reinsurance pricing backdrop that has become increasingly challenging,” the analysts continue, adding that improved prospects in life reinsurance are one reason for this as well as the ability of the larger reinsurers to structure complex, custom risk transfer solutions.

However, more positively, the analysts at J.P. Morgan Cazenove believe that “long-term trends can continue to fuel a moderate level of growth on a persistent basis,” which is an encouraging statement for the entire market, not just the world’s largest players.

Structural factors, such as a gradual expansion of global GDP and insurance penetration and cyclical factors that attract more buying such as Solvency II, are cited by the analysts as reasons to expect demand growth for reinsurance will continue.

As a result J.P. Morgan Cazenove expect modest growth from global reinsurers, ranging from as much as 6% per annum from SCOR to 1% from Munich Re and Hannover Re.

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