Against all odds, some of these reinsurers have even managed to raise funds in 2020. However, this injection of new financial resources was not good enough to offset the slight decrease in capacity reported during the current year.
Thanks to the rebound in the equity markets, the 20 largest reinsurers had a capital surplus of 8% at the end of 2019, an assessment being made in relation to the requirements of their rating level.
Since the natural catastrophes that heavily affected 2017 and 2018, no reinsurer has been granted an AAA rating. At the end of 2020, the best rating, AA+, is held by only one reinsurer, Berkshire Hathaway while three other reinsurers are rated AA.
In addition to natural catastrophes, other factors have led to the downgrades in ratings seen in 2017-2018. These downgrade factors include asset-liability management adjustments, longevity risk capital charges, share buybacks and special dividends.
In 2020, 40 reinsurers hold a minimum S&P rating of A-. These reinsurers have raised nearly 10 billion USD in capital in 2020. The current year has also witnessed the arrival of new reinsurance companies, determined to tap into the potential price rebound.
To discover | Global reinsurers: S&P and AM Best ratings [4]
S&P rating and outlook for the top 40 reinsurers
In 2020, 8 of the top 10 reinsurers have had their ratings confirmed, while two of them have been downgraded.
Notably, no reinsurer in the top 10 managed to obtain a higher rating in 2020 than the one obtained in 2019.
The overall level of both traditional and alternative capital has recently declined. This has helped to support the rebound in non-life reinsurance rates in an industry that so badly needs it.
To discover | Non-life reinsurers’ profitability [5]
It should also be noted that with the exception of AM Best, most rating agencies [6] have downgraded the outlook for the sector from stable to negative. Standard & Poor's expects a drop in profitability that will have its impact on the combined ratio.
The agency estimates that this ratio will be close to 105% in 2020, or even higher if losses related to coronavirus exceed 30 billion USD for the whole insurance and reinsurance industry. Only AM Best has kept the market outlook stable.