The annual reinsurance Rendez-Vous de Septembre is underway in Monte Carlo amid relatively positive outlooks for the sector following rate increases and changes to terms and conditions.
The event, which was founded in 1957, typically brings together nearly 3000 insurance, reinsurance, brokerage and risk management professionals from more than 80 countries.
S&P Global Ratings in a report released ahead of the gathering says it has changed its view of the global reinsurance sector to stable, after holding a negative view since May 2020.
“Reinsurance pricing is the most obvious recent improvement for reinsurers and has been on the rise for a few years now, especially this year in short-tail lines,” S&P says.
In addition, S&P says stricter terms and conditions, increasing attachment points, scaled-down limits and fewer aggregate covers, stronger investment income and life earnings at pre-pandemic levels “instil some confidence” that the sector will effectively tackle its challenges and earn its cost of capital in 2023-24.
The combined ratio of the top 20 global reinsurers was 96.0% last year, better than the five-year average of 99.7%. The positive trend continued in the first half of 2023, with combined ratios ranging from the mid-80s to the low 90s, according to the report.
“Hybrid business models are common nowadays as reinsurers expand into primary specialty insurance, including US surplus lines, to diversify their books and reduce volatility in their underwriting results,” S&P says.
“Reinsurers have also remained disciplined regarding the business they write, avoiding or at least reducing their exposure to certain problematic contracts such as aggregate covers and causing primary insurers to retain more risk.”
Global combined ratios of 92-96% are forecast for this year and next year, with a return on equity of 9-12%, barring any outsize catastrophe losses.
Moody’s Investors Service has maintained a stable outlook following recent rate increases.
“The sector’s strong pricing momentum seems poised to continue, with over 70% of respondents to our latest annual survey of reinsurance buyers expecting prices to rise into 2024,” it says.
Moody’s says a pattern of primary insurers assuming a greater portion of higher frequency but lower severity losses was seen during this year’s first half, when many US primary insurers reported significant losses from large convective storms, while most of the losses didn’t affect reinsurance programs.
A panel of speakers at an event hosted by Guy Carpenter has said the reinsurance market continues to demonstrate resilience in response to ongoing and new global challenges.
“Heading into January 2024 renewals, we believe demand for reinsurance will grow with reinsurers’ willingness to deploy capital also increasing, although underwriting discipline will not subside,” Guy Carpenter Chairman David Priebe said.