JP Morgan analysts stated at the European Insurance Conference that the reinsurance sector is expected to continue experiencing a hard market, with notably high pricing levels observed in property catastrophe lines of business.
Analysts highlighted the highly favourable pricing in the reinsurance market, comparable to historical peaks, which is expected to result in considerably enhanced profitability.
Despite notable improvements in pricing, terms, and conditions, the industry has yet to witness substantial capital inflows, as alternative capital providers prefer to wait for concrete evidence of improved profitability before reentering the market.
“We remain constructive on the reinsurance space with OW ratings on Hannover Re, Munich Re and Swiss Re. Hiscox (N) management also flagged the excellent market conditions which should benefit their reinsurance business which makes up ~25% of the premiums.”
Investors currently seem more concerned about asset risks, particularly credit and real estate, compared to the relatively relaxed stance of European insurers.
Swiss Life maintains confidence in the quality of its real estate portfolio, including both commercial and residential properties, while Legal & General emphasises the minimal defaults in its investment grade credit portfolio and its selective exposure to commercial real estate, excluding significant Office or Retail holdings.
Given Legal & General’s strong capital position and growth prospects in the UK life market, a positive outlook is maintained for the company over the long term.
Surprisingly, there was limited discussion about IFRS17, suggesting that most European insurers are not concerned about it significantly impacting their strategies and believe it has minimal influence on the underlying economics, the analysts noted.
