Analysts at Deutsche Bank are forecasting that the solvency ratios of European insures and reinsurers will strengthen further in 2022, following a market gain of +14pts of solvency in total last year.
Solvency improvement in 2021 was largely driven by higher bond yields, while organic capital generation net of dividends added 2pt and exceptional capital management actions deducted 1pt.
According to Deutsche Bank, the net effect was to leave to the average solvency ratio across the sector up 15pts over the year at 216%.
Among the largest European reinsurers tracked by Deutsche Bank, Hannover Re continues to stand apart from peers with a solvency ratio of 222%, as calculated by analysts at the German investment bank.
Deutsche Bank’s solvency ratio figures for Munich Re and SCOR, which exclude the benefits of long-term guarantee measurers, show the two reinsurers as standing at 199% and 213%, respectively.
Looking forward, analysts believe a further strengthening of solvency ratios will be one of the key macro themes of 2022.
“Rising ratios provide a greater degree of protection against downside risks, allow greater flexibility to invest in higher yielding assets or take on extra growth and could underpin or raise expectations of capital return,” they explained.
Stress analysis by the bank shows that the European re/insurance sector’s resilience to further stress currently remains strong at 2.25x, compared with 1.7x at the end of 2020.
