Global non-life reinsurers are poised to report improved underwriting results for 2022 as rate increases start to have an effect, with further rises supported by elevated catastrophe losses, still low interest rates and ongoing inflation concerns, according to Fitch Ratings.
For the global reinsurance companies in Fitch’s universe, net premiums written increased by 18.5% in the first half of 2021, when compared with the previous year, as rates continued to rise alongside a surge in demand for coverage.
This year, renewal rates have continued to increase, although ample capacity led to a slowdown after consecutive years of rate improvements, leading to what has been described by some as disappointing price hikes.
According to Fitch, renewals have so far largely not taken into account pandemic-related losses, but the ratings agency says that this could change next year with greater certainty around the ultimate loss.
Looking ahead, and Fitch does expect reinsurance renewal rates to continue to rise at the key January 1st, 2022 renewals season, but expects improvements to be somewhat reduced in the high single-digit / low double-digit levels.
Currently, states Fitch, pricing is still inadequate in the face of rising catastrophes.
In light of the recent catastrophe activity in Europe, notably the flooding that impacted parts of Western and Central Europe, Fitch says that “European property rates in particular could be poised for an uptick in 2022 given recent increased catastrophe losses in the region.”
During H1 2021, global insured and reinsured cat losses reached a manageable $40 billion, which is up on the prior year by $5 billion and also above the 10-year average of $33 billion.
Of course, the flooding in July will add to this total in the second half of the year, with reports suggesting total re/insured losses could be at or above €6.5 billion.
Furthermore, the Atlantic hurricane season is ongoing and expected to see above-average activity, highlighting the potential for additional losses in the weeks and months ahead.
For the 17 non-life reinsurers monitored by Fitch, H1 2021 underwriting results were promising, with an aggregate reinsurance calendar year combined ratio of 94.5%, which marks an 11percentage point improvement from the same period a year earlier.
“Fitch expects underlying combined ratio improvement to persist into 2022 as premiums earn through,” says the ratings agency.
