Reinsurers’ combined ratio nearing 100% in 2017

According to Fitch ratings, reinsurers’ performance has been declining over the first half of 2016, with the increase in natural catastrophes being the main cause behind this decline.
reinsurance combined ratio

Reinsurers’ combined ratio by June 30, 2016 amounted to 93% compared to 88% a year earlier. The rating agency believes that this deterioration is poised to continue in the second half with a combined ratio of 94.2%.

This trend is likely to linger on in 2017 as a 99.2% combined ratio is expected for that period. This change in the results is accounted for by the expected decrease in reinsurance rates, a lower level of reserves and the rise in the impact of natural catastrophes.

Over the first half of the year, Partner Re, Swiss Re, Lloyd’s and Hannover Re posted particularly high combined ratios. The overall deterioration of combined ratios will trigger a decrease of the return on equity (ROE), already noted by 30 June 2016, with a 9.2% rate compared to 10% by the end of June 2015. With ever-degrading investment return, Fitch is aiming at an 8.5% ROE by the end of 2016 and 8% in 2017.

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