Reinsurers in control

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The economic recovery that began in the second half of 2021 is bringing a breath of fresh air to an activity that has been seriously strained by the emergence of Covid-19. In the end, the pandemic shock to be borne by insurers and reinsurers could be limited to a loss ranging between 50 to 70 billion USD, far from the 203 billion USD initially advanced. For the record, the insured losses due to hurricane Katrina of 2005, the largest natural catastrophe loss in history, amounted to 61 billion USD.

Although the health crisis has been well absorbed by the industry, it has allowed reinsurers to tighten the market with a series of adjustments of premium rates, exclusions, guarantee limitations and coverage ceilings.

This cleanup, which began with the 2021 renewals, is poised to continue throughout 2022. According to the rating agency Fitch, the results of the top 17 reinsurers have improved significantly as of the end of June 2021, with an 11 point drop in the loss ratio. Still according to the forecasts, reinsurers are likely to recover all Covid-19 losses as early as 2022.

In fact, the current context remains quite favorable to reinsurers, whose support is essential for the coverage of extreme risks.

The rise of epidemic, climatic and especially cyber risks requires a growing need for capacity that only reinsurance is able to provide. The unpredictability of the economic and social environment, which creates increasingly complex and sophisticated risks, requires more than ever the presence of players with substantial shareholder’s equity, capable of atomizing risk on a global scale and controlling the volatility of results over time.

Atlas Magazine N°185, November 2021 [1]