Intense competition from both traditional and alternative providers of reinsurance capacity in the first-half of 2017 combined with falling rates across the property and casualty (P&C) sector is hindering premium growth for the industry, according to Fitch Ratings.
For the group of 19 non-life reinsurers tracked by Fitch, and that reported premium growth on a comparable basis, reinsurance net premiums written (NPW) declined by 4% in the first-half of 2017 when compared with the previous year.
In its mid-year 2017 reinsurance financial results report, Fitch states that just seven of these reinsurers actually posted an increase in NPW in the period. Fitch attributes this to the “continuing competitive traditional and alternative reinsurance market environment,” which is leading companies to pullback on the most competitive and underpriced business lines in an effort to offset some of the negativity.
Organic growth has become increasingly difficult to achieve in the challenging, softening reinsurance market landscape, and as rates continue to decline across the majority of business lines, especially in the property and casualty space, reinsurers have reduced their exposure in some business lines.
For the Bermuda/U.S.-based firms, Everest Re recorded the strongest NPW growth in the period of 19.3%, driven by a new crop reinsurance arrangement and some increases in treaty property and financial lines operations. Markel also recorded double digit NPW growth of 12.8% in H1 2017, as a result of two specialty quota share arrangements.
Only two other Bermuda/U.S.-based reinsurance companies posted NPW growth in the first-six months of the year, with eight reporting a decline in NPW in the period, “as flat or declining prices in both property and casualty reinsurance lines, sluggish reinsurance demand and opportunistic retrocessional reinsurance purchases dampened growth,” explains Fitch.
The largest decline in the period was seen at AXIS Capital, of 15.4%, which was driven by the business it ceded to its hedge-fund backed reinsurance entity, Harrington Re.
For the big four European players, Hannover Re recorded NPW growth of 18% in the period, while SCOR recorded reinsurance NPW growth of 12.7% in H1 2017. Fitch attributes some of the growth at these two firms to increased demand for reinsurance protection for solvency relief.
Both Munich Re and Swiss Re reported NPW declines in the first-half of this year, showing that even the largest players need to reduce underwriting in the most competitive and pressured parts of the marketplace as the softening landscape persists.
Reinsurance market conditions are expected to remain very challenging and soft throughout 2017 and into next year, so it’s likely that reinsurance companies will continue to pullback on areas such as P&C, where rate declines are the steepest and competition from alternative capital is the most intense.
