Analysts at Barclays expect reinsurers to enjoy the best overall top-line outlook in the European insurance market, with decent rate momentum and growth in demand also set to benefit the sector.
The firm noted that the P&C re/insurance market came into 2020 in a strong position, with an estimated combined capital based of $650 for US and European players.
And after three years of extreme losses and somewhat soft pricing, reinsurance pricing finally appears to be gradually increasing throughout the year.
With reinsurers potentially seeing a large impact from COVID-19 losses, this pricing pressure should continue to remain high into 2021, Barclays added.
In addition, demand for reinsurance should accelerate, as evidenced by aftermath of large catastrophes when cession rate goes up.
Elsewhere in the market, analysts argued that commercial volumes should show the strongest direct link to GDP decline, offset by the strongest rate momentum, resulting in an overall flat top-line.
By contrast, in retail P&C, volumes are expected to be somewhat more resilient but pricing power to be very limited.
While uncertainty remains high, Barclays believes overall industry COVID-19 losses are likely to settle towards the middle of its initial US$30-80bn estimated range, with the tail risk of regulatory overhaul now far lower.
It further estimates that COVID-19 coupled with related market volatility eroded close to $100 billion of capital in Q1, leaving the P&C industry with around $70 billion of surplus going into hurricane season.
“This positions the industry well to weather potential further earnings volatility,” Barclays stated, “yet clearly explains the need for pricing to firm up to rebuild the stock of capital.”