The reinsurance sector’s return on capital is set to rise, surpassing the high-single digit return that was forecast for last year, says Fitch.
This, says the ratings agent, will match the current cost of capital to the industry.
It added: “Moderately better underwriting margins and premium growth will help the reinsurance sector to offset falling investment yields in 2022.”
The agency went on: “[We expect] price improvements to taper off over the next 12–18 months as the risk appetite in the industry continues to increase and capital remains strong in the industry. This assumes a normalised level of large losses.”
Renewals this month, Fitch said, were characterised by ‘a tight correlation between the recent loss experience and the respective price movements’.
In addition, lines of business such as property catastrophe in Europe, cyber, and the retrocession market saw the most-pronounced rate increases.
However, Fitch added: “Conversely, the price improvements of the past couple of years were deemed sufficient in most casualty lines of business, which led to a stronger interest in quota-share treaties and rising reinsurance commissions paid. Premium rates also fell in trade credit insurance as claims did not increase as anticipated.”
