RBC Capital Markets have forecasted growth for reinsurers across developed markets as the Trump administration’s expansion of U.S. economy fiscal policy is expected to create more demand for reinsurance.
In recent years, primary insurers in Europe have been passing on more business to reinsurers as they strive to deliver smoother earnings to shareholders and this trend is expected to continue, especially in quota share capacity, say RBC analysts.
And while previously in the U.S. a change in reinsurance purchasing habits and stronger pricing environment in commercial insurance lines resulted in insurers retaining more of the market share, demand for reinsurance is now also expected to increase together with the growing pool of risk for the insurance market as the U.S. economy grows.
Alternative reinsurance capital, increasingly making headway into the markets and moving more directly into lines of risk, has made for tough reinsurance market conditions. But according to RBC analysts quota share reinsurance offered by the largest reinsurers “is highly capital efficient in funding growth” and this should result in an increase of reinsurance premiums.
Another factor likely to create a market upswing across Europe is new legislation impacting re/insurers, with Solvency II and the Swiss Solvency Test making reinsurance a more attractive means of capital management.
Across developed markets, new political and economic developments are expected to lead to primary insurers ceding more of their exposures to reinsurers, with the largest reinsurers Swiss Re and Munich Re named by RBC as best placed to take advantage of the U.S. market turn.