The study also highlights potential threats that could have an adverse impact on the full year’s earnings, including the ongoing Atlantic hurricane season and other insured natural catastrophe losses. Moreover, reinsurers’ financial performance in 2021 could still be potentially affected by ongoing legal actions related to the Covid-19 pandemic.
The key highlights include:
- Global reinsurers experienced lower combined ratios in 2021 as a result of stronger underwriting profitability compared with the previous year
- The strengthening of equity markets positively affected reinsurance companies' results in 2021 as markets rebounded from the lower valuations experienced in the first quarter of 2020
- In DBRS Morningstar's view, global reinsurers are still exposed to potential tail costs of the pandemic and natural catastrophe losses during the rest of 2021
“The major challenges ahead for P&C reinsurers continue to be the treatment of business interruption losses by courts of law in different jurisdictions globally and insured losses from natural catastrophe events,” said Victor Adesanya, Vice President of Insurance at DBRS Morningstar. “However, DBRS Morningstar estimates that, in the absence of multiple extreme weather events during the remainder of 2021, underwriting losses should be limited to manageable earnings events for most reinsurers this year. DBRS Morningstar also anticipates that the reinsurance industry will be able to maintain its current strong capitalisation in the near future.”
Meanwhile, German reinsurer Hannover Re anticipates a continuing trend towards higher prices and improved conditions in property and casualty reinsurance for the various rounds of renewals in 2022.