Best’s Market Segment Report: More Favorable Pricing Permeates Global Reinsurance Industry, But Is It Sustainable?
The new Best’s Market Segment Report, “Global Reinsurance: Fighting the Last War,” notes that the days of large catastrophic events triggering widespread market hardening are gone, replaced by pockets of microcycles, based on geography and loss experience. The 2017-2018 catastrophes showed how the overall reinsurance market failed to recognize and price for the fundamental changes that had occurred operationally and structurally in Florida’s property market. The 2018 California wildfires and Typhoon Jebi in
According to the report, however, the evolution of the market can favor reinsurers if they embrace change and innovation in their business models. While technology can be a key driver of change, it is not the only one.
Third-party capital continues to proliferate as investor interest has increased alongside more varied reinsurance structures, and has become more closely aligned with traditional reinsurance capital. Despite the capital markets’ increased influence, dedicated reinsurance capacity essentially remained flat in 2018, at
With the costly disasters of 2017 and 2018, reinsurers have entered into a period of seismic change. AM Best believes no two market cycles are ever quite the same, and so reinsurers that reposition their portfolios tactically could be better prepared for whatever challenges lie on the horizon. “Like the proverbial ‘generals always fight the last war,’ many reinsurers that allow past performance to shape their expectations of future performance will be the ones more likely to be caught off-guard again,” said
AM Best’s market segment outlook on the global reinsurance sector remains stable, primarily reflecting a more-stabilized, non-life pricing environment, as well as a stable market environment in the global life reinsurance segment. Although the operating and competitive landscapes of these two major reinsurance business segments are distinct, the resulting diversification benefits the global reinsurance segment from an overall earnings perspective. Going forward, particularly for non-life reinsurers, the question is whether the lessons learned will result in any meaningful and sustainable change in the market.
Other highlights from this year’s report include:
- The most notable movement in AM Best’s highly regarded annual ranking of the Top 50 Global Reinsurance Groups was Swiss Re Ltd. moving back into the top spot as the world’s largest reinsurer, as measured by reinsurance gross premium written. Other than 2016, when Swiss Re was No. 1,
Munich Reinsurance Company had held the top spot every year since 2010, and was No. 2 in this latest ranking. This report also breaks out two sub-rankings of top non-life and life global reinsurers. - The 2017-2018 catastrophe events increased attention on the collateralized reinsurance market, as it absorbed a substantial amount of the related losses. However, it remains the fastest-growing segment of the insurance-linked securities market, with market capitalization of approximately
$55 billion out of a roughly$98 billion ILS market. - The global reinsurance report also provides in-depth looks at the Lloyd’s and life reinsurance markets, as well as geographic regions such as
Latin America , MENA andAsia-Pacific .
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=289149. A short video interview with AM Best Senior Director
Additionally, AM Best will present a webinar, “State of the Global Reinsurance Market,” on
AM Best also will host its annual Reinsurance Market Briefing at the 2019 Rendez-Vous de Septembre (Rendez-Vous) on
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Source: AM Best
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