Non-life reinsurance net premiums written grew by a substantial 18.5% in 1H21, as prices continues to rise and demand remained strong. Reinsurance renewal rates continued to increase in 2021, although pricing momentum slowed after two years of improving rates amid abundant capacity.
Thus far, renewals have largely not taken into consideration pandemic-related losses but this could change in 2022 with improved clarity around the ultimate losses. Favorably for reinsurers, communicable disease exclusions remain widespread in property treaties.
Rate increases are likely to continue at the January 2022 renewals, albeit at somewhat reduced high single-digit/low double-digit levels, as rate adequacy is approached. European property rates in particular could be poised for an uptick in 2022 given recent increased catastrophe losses in the region.
Current pricing is still inadequate in the face of rising catastrophes. Global (re)insured natural catastrophe losses were a manageable $40 billion in 1H21, up from $35 billion in 1H20 and above the $33 billion 10-year average (2011–2020) of 1H insured losses. However, July flooding in Europe could add $8 billion to 2H21 catastrophe losses, with potential additional losses from the active Atlantic hurricane season.
Non-life reinsurers saw considerable YoY improvement in 1H21 underwriting results, shifting to an underwriting gain as pandemic-driven losses subsided. The 17 non-life reinsurers monitored by Fitch posted an aggregate reinsurance calendar year combined ratio of 94.5% in 1H21, down 11 pp from 105.9% in 1H20, which included $6.1 billion of Covid-19 pandemic-related reinsurance losses (11.3 pp of earned premiums). Fitch expects underlying combined ratio improvement to persist into 2022 as premiums earn through.