On the back of de-risking and diversifying actions, global reinsurers are showing more resilience than in previous cycles, in part thanks to positive underwriting margins, higher reinvestment rates, and diversification, according to a recent AM Best report.
AM Best notes that the exceptional results seen in 2023 are unlikely to be repeated. However, despite higher-than-average catastrophe losses in the second quarter of 2024 and events like the Baltimore Bridge collapse in March, the industry is still on track for a profitable year.
In the Property market, AM Best reports that, while monitoring the ongoing Atlantic hurricane season, the frequency of severe convective storms continues to rise. Nevertheless, because reinsurers have increased attachment points throughout 2023 and maintained discipline into 2024, they are far less exposed to frequency losses from such storms, which positively impacts earnings.
Beyond natural catastrophes, concerns persist regarding the performance of legacy US casualty and some life insurance portfolios. Key issues include the extent to which these problems are industry-wide and how effectively affected carriers are addressing them.
For the Casualty sector, AM Best notes that while historical liability issues may impact performance, they are unlikely to threaten the financial stability of companies with robust capital reserves. In response to social inflation in US liability, it has prompted stricter underwriting, client selection, and pricing adjustments for new business.
“The stellar results recorded in 2023 are unlikely to be repeated, and most of the companies’ own targets, although optimistic, are more modest. Performance for the first half of 2024 is very comparable on an annualised basis, providing a comfortable margin for uncertainty,” AM Best concluded.
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