High price discipline in a hardening market environment, rising reinvestment yields and strong demand for reinsurance protection are likely to support earnings. These factors counter upward pressure on claims inflation due to a high inflation environment and climate change as well as falling asset values, which reflect higher interest rates and rising fears of a global recession.
Fitch expects the reinsurance sector to maintain very strong capital adequacy in 2022 and 2023 – a testament to prudent risk management and past earnings retention. However, Fitch believes capital repatriation will become more important over the next 18 months as an increasing number of reinsurers cut back on capital-intensive property catastrophe business.