European reinsurers report fall in net profits for H1 2022
The four largest European reinsurers - Munich Re, Swiss Re, Hannover Re and SCOR have reported 47 per cent year-on-year decline in net profits for the first half (H1) of 2022, according to Moody’s
The four insurers reported combined net profits of €1.9 billion for H1 2022, compared with €3.6 billion in H1 2021. All four reported weaker net results, but Hannover Re's and Munich Re's fell only moderately, while SCOR's and Swiss Re's were significantly lower.
The figures reflected weaker property and casualty (P&C) reinsurance results due to a high level of natural catastrophe claims, and lower investment returns due to a volatile financial market. Moody’s said that this higher-than-average number of catastrophe claims in H1 will put most companies’ catastrophe loss budgets ‘under strain’ for the rest of the year.
Moody’s added that the group’s weaker P&C underwriting performance ‘partly reflects a number of small-to-mid-sized natural catastrophe events during the first half, including storm Zeynep in February, rain and flooding in Australia in February and March, more flooding in South Africa in April, and severe hailstorms in France.
Catastrophe figures may understate true impact of natural disasters for the period
Moody’s also noted that the peer group’s reported catastrophe losses may also understate the true impact of natural disasters during the period. It noted that both Hannover and SCOR disclosed sizeable agricultural claims related to droughts in Brazil during the period but did not classify them as catastrophe losses.
Life reinsurance results benefitted from a fall in Covid-19 claims in the second quarter (Q2) in line with forecast figures. Meanwhile, estimated claims related to the war in Ukraine remain subject to some uncertainty, but are relatively moderate.
Moody’s also noted that while reinsurance policies have renewed at substantially higher prices this year, claims inflation has partially offset any gains made.
Meanwhile, Moody’s said that ‘Covid-19-related life reinsurance claims are diminishing, and rising interest rates will support investment returns over time’, and that ‘while falling bond and equity prices resulted in a significant decline in reported shareholders' equity, capital adequacy remains very strong’. Consequently, the four companies should remain capable of absorbing future shocks.
The financial services provider added that while the four businesses ‘appear confident that price increases will be sufficient to offset rising claims costs … we believe upcoming reserve reviews could raise questions about whether reserving levels are sufficient to mitigate broad-based claims inflation’.
Fiona Keating explored the role of reinsurers in the health insurance sector post-Covid for ITIJ’s April 2022 edition.