Global property & casualty (P&C) reinsurers posted strong earnings with solid top-line growth in the first half of 2024, which was primarily driven by the favourable pricing environment, notably across property and specialty business, reports Morningstar DBRS.
Looking ahead, the agency’s outlook for the global P&C reinsurance market remains positive, despite high natural catastrophe losses and likely lower interest rates globally.
Apart from French reinsurer SCOR, and PartnerRe, all of the top global P&C reinsurers witnessed significant net income growth in the first half of 2024, compared to last year.
Analysts noted that the total aggregated net income increased to $12.9 billion for H1’24 from $10.3 billion in H1’23, which represents a 25% year-over-year increase.
Moreover, analysts also flagged how the property and specialty businesses remain “particularly attractive” to reinsurers, due to strong market demand and higher pricing power, distinctly for nature catastrophe risks.
“In the meantime, some casualty lines have been relatively less attractive because of social inflation, leading to selective underwriting and reserve strengthening from Swiss Re and PartnerRe in Q2 2024. Reinsurers reported modest rate increases and slight volume gains from the existing and new business relationships at the January and April reinsurance renewals,” Morningstar DBRS said.
Meanwhile, the average combined ratio of Morningstar DBRS’ selected reinsurers remained relatively stable at 86% in H1’24, relative to H1’23 as a result of the counterbalanced nat cat losses seen in both Q1’24 and Q2’24.
In fact, global nat cat losses increased significantly in Q2’24, from below average levels in Q1, as a result of several midsized events such as floods in Central Europe, and the Arabian Gulf, along with severe convective storm outbreaks seen across the United States.
Notably, the Bermuda reinsurers experienced larger affects from these events, with the averaged combined ratio increasing to 87.6% in the period, from the 85.5% figure in H1’23.
Gallagher Re estimated preliminarily total global insured nat cat losses at $61 billion for H1’24, which is on par with 2021 and ranks as one of the costliest half-year losses seen in the past decade.
It’s important to note, that the four most recent half years have all been materially higher than losses in H1 2014–H1 2020.
Analysts went on to explain, that in order to mitigate rising nat cat losses, reinsurers have raised premiums and introduced tighter terms and conditions, especially since January 2023.
“Our outlook for the global P&C reinsurance industry remains positive as a result of the prevailing favourable pricing environment, disciplined underwriting, and strong reinvestment yields. However, natural catastrophe losses present a potential headwind for global reinsurers for the rest of 2024 especially as the hurricane season is predicted to be severe,” added Morningstar DBRS.
Concluding: “Moving into H2 2024, there have already been several severe-weather events in July and August, such as Hurricane Beryl, Hurricane Debby, and wildfires in the U.S. and Canada. While these events are unlikely to affect the capital positions of the reinsurers, we believe they will add some earning pressures on the industry in H2 2024 once the claims from these events are reflected in the earnings.”
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