This strong increase in earnings allows reinsurers to overcompensate for a rise in excess mortality losses linked to Covid-19, above-average natural catastrophe claims and a lower investment income. The capital position of the big four improved further in 2021, so that three out of four reinsurers have decided to significantly increase capital returns to shareholders.
The reinsurance price increases across large parts of the business that were up for renewal in January 2022 were diminished compared to 2021 for all four major European reinsurers. US casualty, in particular, witnessed increased price pressure as more capital was allocated to this line of business. This trend is likely to spread to other lines of business in 2022 and 2023.
However, Fitch believes that the tailwinds from the hardening market environment are still strong enough in 2022 to counterbalance the mounting risks from economic inflation and heightened financial market volatility. Fitch also expects a relief for earnings that results from a significant decline in excess mortality claims in the absence of new relevant variants of the coronavirus in 2022.
The special report ‘European Reinsurers’ Earnings Much Improved in 2021’ provides insight into recent developments in the global reinsurance market and is available at www.fitchratings.com or by clicking the link above.