Best’s Market Segment Report: Operating Performance, Retro Cost Drive Asian Reinsurer Strategies

HONG KONG--(BUSINESS WIRE)--
Despite a sharp increase in catastrophe losses outside their home markets and a challenging investment environment, major Asia-Pacific reinsurance companies still managed to deliver strong year-over-year net premium growth of 8.1% in 2022, according to a new AM Best report.

The Best’s Market Segment Report, “Operating Performance, Retro Cost Drive Asian Reinsurer Strategies”, is part of AM Best’s look at the global reinsurance industry in concert with the Rendez-Vous de Septembre in Monte Carlo. Additional reports, including AM Best’s annual ranking of the Top 50 global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, life/annuity, health and regional reinsurance markets, are available at Best’s Research.

According to this report, which is based on the operating performance of a group of selected Asia-Pacific-domiciled reinsurers that rank among the top 50 largest reinsurance groups globally, reinsurers sustained the ability to deliver stable operating and combined ratios in 2022. The composite’s net income fell to USD 166 million in 2022 from USD 688 million in 2021, while return on equity also declined significantly, to 1.8% in 2022 from 7.0%. However, the combined ratio of reinsurers in the Asia-Pacific composite improved slightly to 100.8 in 2022 from 101.1 in the previous year, lower than the five-year average of 101.0.

“With a higher cost of capital and a challenging investment environment in 2022, Asia-Pacific reinsurers maintained their underwriting discipline in 2023 renewal to ensure a reasonable profit margin and adjust pricing in proportional treaties to improve performance,” said Christie Lee, senior director, head of analytics, AM Best. “Primary insurers also followed this rule, aligning with reinsurance pricing, terms and conditions, which is expected to lead to better revenue and underwriting results for reinsurers.”

Although the absolute level of shareholders’ equity for the Asia-Pacific reinsurers in the composite fell by 9.5% year over year, the result was much better than the 38% capital decline seen for the European “Big Four” composite as monetary easing remains in some Asian countries. “Going forward, AM Best expects shareholders’ equity levels to show a one-time movement in 2023 as most reinsurers in the composite start adopting the new IFRS 17 accounting standard,” said Chris Lim, associate director, analytics, AM Best. “The magnitude of change will vary by company depending on business profile mix, investment classifications and actuarial assumptions.”

Overall, the capital position of the major reinsurers in the Asia-Pacific composite remains robust, and global expansion has contributed to diversification benefits to mitigate their inherent risk of domestic natural catastrophe risk accumulation. At the same time, a lack of aggregate excess-of-loss retrocession capacity availability may result in higher underwriting volatility for reinsurers in future active catastrophe years.

To access the full copy of this market segment report, which includes in-depth looks at the various markets across the Asia Pacific region, including Singapore, Australia and New Zealand, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=335530.

A video discussion of this report also is available at http://www.ambest.com/v.asp?v=ambglobalreap923.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Christie Lee
Senior Director, Head of Analytics

+852 2827 3413

[email protected]

Christopher Sharkey
Associate Director, Public Relations

+1 908 882 2310

[email protected]

Chris Lim, CFA

Associate Director, Analytics

+65 6303 5018

[email protected]

Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

[email protected]

Source: AM Best