Keefe, Bruyette & Woods (KBW) has released a report highlighting weakening reserve cushions for reinsurers across Europe.
According to the report, one of the key findings was that inflation had been eroding European reinsurers’ reserve adequacy for at least a few years before inflation even became a talking point at the end of 2021.
Given that KBW used 2020 loss triangles, the trends identified in the report have likely deteriorated even more since then.
“We zoomed in on the liability lines, which highlighted that reported loss emergence has continued to steepen whilst IBNRs have mostly declined,” notes the report.
“Although Swiss Re was already experiencing the steepest development in the liability lines, the acceleration since our last study has been the most pronounced.”
In KBW’s recent Spotlight on the European reinsurance sub-sector, they calculated that the average reserve surplus amounted to ~4% at the end of 2020.
This is down from ~5% that they calculated in their 2018 study and is now at the lowest level since they began estimating European reinsurers’ reserve adequacy.
Around the ~4% average, Hannover Re (~9%) and Munich Re (~6%) screen stronger than Scor (~2%) and Swiss Re (~1%), implying an unchanged relative strength, states the report.
