Global reinsurance market: 2022 special renewal
In a challenging economic and social environment, the reinsurance market is, at the end of 2021, facing major challenges.
In addition to the persistence of low interest rates, the increase in natural catastrophe claims and the impact of the pandemic, the sector is exposed to a climate of uncertainty linked to the rise in unpredictable, complex and interdependent major risks.
Global reinsurance market: evolution of premiums 2010-2020
The world insurance market has reported 6 287 billion USD in premiums in 2020, divided between the life (46%) and the non-life (54%) classes of business. A little more than 5% of the total premiums, that is about 320 billion USD, are ceded in reinsurance.
The non-life reinsurance activity accounts for 69% of this amount while less than a third of the supply, that is, 31%, pertains to the life business.
In billions USD| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
Insurance premiums | 4 336 | 4 566 | 4 599 | 4 594 | 4 755 | 4 554 | 4 703 | 4 957 | 6149 | 6 284 | 6 287 |
Reinsurance premiums | 200 | 220 | 230 | 240 | 245 | 240 | 230 | 245 | 265 | 300 | 320 |
| Cession rate (%) | 4.61 | 4.81 | 5 | 5.22 | 5.15 | 5.27 | 4.89 | 4.94 | 4.31 | 4.77 | 5.09 |
Sources: Swiss Re and Apref (Association of Reinsurance Professionals in France)
Read also | Life and non-life reinsurance market in 2020
Reinsurers’ operating performance in the first half of 2021
Most major reinsurers have come through the first half of 2021 without difficulty. Having provisioned for Covid-19 claims in 2020, they are posting good half-year results.
The top five players in the market, namely Munich Re, Swiss Re, Hannover Re, Scor and Lloyd's, have reported an increase in written premiums of between 7% and 21% at the end of June 2021 compared to the same period of the previous year. Fitch Ratings estimates that the non-life reinsurance market will grow by 18.5% in the first half of 2021 while also noting an improvement in underwriting results.
The major non-life reinsurers have an overall combined ratio of 94.5% in the first half of 2021, down 11 points from 105.5% in the first half of 2020. The latter ratio includes 6.1 billion USD of losses related to the Covid-19 pandemic.
The good underwriting performance achieved by the reinsurance leaders should continue in 2022 thanks to the rate increases planned in the next renewals.
Global reinsurance market: January 2022 renewal
After several years on a downward cycle, the reinsurance market is picking up, tapping into improved renewal conditions and rate adjustment, a trend that has been observed since the spring of 2020.
Despite the pressure on rates from abundant reinsurance capacity, favorable winds should continue to blow in the next renewal.
Faced with a resurgence of natural catastrophe losses, a revaluation of secondary perils, a Covid-19 loss experience and low investment returns, reinsurers have no choice but to increase their rates. As a result, the rate discipline imposed at the January 2021 renewal, with rates increasing by 5 to 8%, is expected to continue in 2022.
During the previous renewal (January 2021), the main reinsurers imposed improvements in premiums and conditions for all classes of business and geographical areas. For example, Scor reported an average rate increase of 7.8%, Swiss Re 6.5% and Hannover Re 5.5%.
Also in 2021, treaties in the P&C and third party liability insurance, affected by a high level of natural disaster or industrial claims, saw their rates increase by two figures. On the other hand, the growth ranged between 3% and 5% for treaties that did not incur any losses.
For market players, concerned about the worsening loss experience and the increasing impact of climate change, the January 2021 pricing level remains insufficient.
