2017 Catastrophe Losses Mask Deterioration in Underlying Performance Compared to 2005, 2011: Willis Re
Shareholders' equity in 34 reinsurance companies tracked in the Willis Reinsurance Index1 was up 7.8% to
These are the findings of the latest Reinsurance Market Report from Willis Re, the reinsurance business of leading global advisory, broking and solutions company
The rise in equity was driven by unrealized investment gains of
The Index delivered return on equity of 3.4%, down from 8.0% in 2016, after aggregate net income fell to
In a new combined ratio analysis, Willis Re compared 2017 with the severe catastrophe-affected years of 2005 and 2011. The analysis of a subset2 of reinsurers shows that the reported combined ratio for 2017 was 107.4% compared with 108.2% in 2011 and 112.8% in 2005. The impact of natural catastrophe losses in 2017 was 18.1% lower than 2011 (24.8%) and 2005 (25.8%). Notably, excluding natural catastrophe losses and prior year reserve releases, the Ex-Cat Accident Year combined ratio deteriorated further to 94.6% in 2017, from 90.2% in 2011 and 89.2% in 2005.
He continued: "Comparing the 2017 natural catastrophe experience with 2005 and 2011 shows that a number of large global property catastrophe reinsurance accounts were not impacted by the events of 2017. The primary market retained more of the losses from the year's numerous catastrophe events under higher retentions. The Ex-Cat Accident Year comparison of only a 5pt increase from 2005 may be viewed as surprising given the years of rate reductions in the past decade. The 2017 result was supported by the aforementioned reserve releases and investment gains which remains a concern and is why many reinsurers continue to try to push pricing on under-performing lines.
"The pressure on traditional reinsurers from alternative capital suppliers is stronger than ever, as many participants in this market cleared their first true major test. This increase in alternative capital, as well as the global reinsurance market having more capital to deploy, is continuing to dampen price increases in the mid-year renewals."
Download the full report: The Willis Re Reinsurance Market Report is a biannual publication providing in-depth analysis of the size and performance of the reinsurance market. Analysis is based on the Willis Reinsurance Index group of companies. In 2017 The Index includes 34 companies from across the globe.
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About Willis Re
One of the world's leading reinsurance brokers, Willis Re is known for its world-class analytics capabilities, which it combines with its reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world's top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit willisre.com.
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