Reinsurers out of breath

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Sometimes described as a black year, 2022 is showcasing a succession of disasters: health crises, cyclones, heat waves, the Ukraine-Russia war, cyber-attacks [2], in other words, a whole host of events, the majority of which were listed under general exclusions a few years ago.

The number of losses posted by reinsurers during the first nine months of 2022 largely exceeds forecasts, with a third quarter particularly impacted by natural catastrophes. Consequently, Swiss Re, one of the market leaders, has announced a net loss of 442 million USD for the third quarter alone.

For its part, Munich Re, another reinsurance giant on the scene, has reported, for the same period, an above-average loss experience with a net loss of 1.6 billion USD due to hurricane Ian. Hannover Re, the world's third reinsurer, has declared net incurred losses of 1.484 billion USD as of 30 September 2022. The same is true for SCOR, Lloyd's, AXA XL Re, Everest Re, Axis, Arch and Chubb.

Unfortunately for the reinsurers, the year 2022 has not come to an end, with a cyclonic season still underway and a drought balance sheet yet to be established.

However, the magnitude of these last two events is not the main concern. The tone is set: the 2023 renewal will be difficult for insurers. With a combined ratio above or close to 100%, the reinsurance business is far from being profitable. Reinsurers are certainly taking advantage of the long-awaited rise in interest rates to cushion their technical losses, but high inflation could work against them, slowing down revenues and worsening claims reserves.

It is therefore a weakened market, poorly priced and not at all consistent with the reality of the risk, with a fairly low average profitability, waiting to come to grips with climate change, the number one issue of the future. In this context, only a sharp increase in rates on 1 January 2023 will enable reinsurers to meet their commitments and keep afloat.

Atlas Magazine N°195 November 2022 [1]