All North American reinsurers analysed by Fitch Ratings have reported deterioration in underwriting results, leading to underwriting losses.
The overall segment reported a combined ratio of 105.4% in 2020, up nearly 9 percentage points from the prior year, with COVID-19 losses as the primary difference.
The losses added 7.4 percentage points to the combined ratio, while natural catastrophe losses added 6.8 percentage points, representing a modest improvement from the prior year.
However the underlying accident-year combined ratio, excluding catastrophes and COVID-19 losses, improved by 1.5 points to less than 90%.
Sirius International Insurance Group reported coronavirus losses only through September 2020, as the group did not disclose its Q420 pandemic or catastrophe losses in its final annual public filing before the 2021 merger with Third Point Reinsurance.
The group of reinsurers reported $1.8 billion of COVID-19 losses in 2020, most of which was recorded in the second half of 2020 and was mostly attributable to the reinsurance segment operations versus primary insurance business.
Sirius and RenaissanceRe recorded coronavirus losses greater than the group average at 12.4% and 8.9% of earned premiums, respectively whilst Watford Holdings reported a modest 1.0% of earned premium impact from the losses.
Catastrophe losses in 2020 moderated relative to 2019, furthering an improving trend over several years. More than one-half of 2020’s $1.6 billion of catastrophe losses in the group occurred during an active third quarter and included Hurricanes Laura, Sally and Isaias; Western U.S. wildfires; the Midwest derecho; and aggregate contract losses.
Net written premium (NWP) for the group increased by 5.4% during 2020 on the strength of acquisition activity and favourable pricing trends in most property/casualty lines.
PartnerRe and AXIS Capital Holdings were the only companies in this group to post declines in NWP at 11% and 3%, respectively. These entities have been focusing on reinsurance portfolio optimisation through non-renewals and decreased line sizes in an effort to reduce volatility and improve profitability.
RenaissanceRe posted the highest NWP growth at 21%, reflecting business from its March 2019 acquisition of Tokio Marine Holdings reinsurance platform.
The reinsurers shifted to unfavourable reserve development during 2020, increasing the group combined ratio by 1.2 points, compared with a 0.4-point benefit in the prior year. Everest Re Group was the most significant driver of this trend, taking a $400 million reserve strengthening in 4Q20, primarily within longer-tailed casualty segments.
PartnerRe reported also shifted to adverse development in 2020 from favourable development in 2019, partially reflecting increases in casualty claims severity from deterioration in loss costs trends.
The group reported operating ROE of negative 1.5% in 2020, down from 5.3% in the prior year, with all companies, excluding Watford Holdings reporting worse results.
AXIS, PRE and SG each posted operating losses driven by underwriting losses, while Watford Holdings reported strong operating results based in part on an underwriting portfolio mix less exposed to catastrophe and pandemic-related claims.