Whether it is the result of greater discipline, solid risk management or just luck, the U.S. reinsurance segment did post better results than its domestic property and casualty industry counterpart last year, according to National Underwriter's annual review of financial results available through NU's affiliate, Cambridge, Mass.-based Highline Data.
In spite of a 70 percent drop in net income and a 12 percent surplus decline in 2008–both heavily driven by a 50 percent decrease in overall investment gains–the reinsurance segment was able to report a slim underwriting profit, with a combined ratio of 100.7 overall.
The aggregate 2008 combined ratio was 100.1 for the top-25 reinsurers, which NU ranked based on reinsurance premiums assumed from nonaffiliated companies. (See related article, “Reinsurer Defined,” for further explanation of NU rankings.)
In comparison, according to an April report from the Jersey City-based Insurance Services Office, the U.S. p&c industry overall (including reinsurers) posted a combined ratio of 105.1, with net income plummeting 96 percent and surplus declining 12 percent.
Net written premiums dropped just over 1 percent for the p&c industry in 2008, according to ISO's report. That contrasts a jump in net written premiums for U.S. reinsurers of almost 7 percent, according to NU's compilation of Highline Data company reports.
Supporting comments from executives attending the Standard & Poor's 2009 Insurance Conference in New York earlier this month (see story, page 12)–that lessons have been learned by U.S. reinsurers over the last decade–we turned the clock back to reveal the extent of improvement in reinsurer results since the turn of the century.
Using the same definition we used to classify reinsurers to compile our 2008 ranking, we identified companies that would have been classified as reinsurers in 2000.
Key findings are:
o For the U.S. reinsurance industry overall, the combined ratio rose from about 104 in 1998 to nearly 116 in 2000, and to nearly 140 in 2001–a year impacted by losses from the 9/11 attacks.
o The largest reinsurer at the time, General Re, posted a combined ratio over 180 in 2001 and averaged 115 for the two prior years.
o Several reinsurers among the top-30 are no longer actively writing U.S. reinsurance as members of the group they participated in back in 2000. They include GE Reinsurance, Converium North America (now known as Finial), Gerling, PMA, Coliseum (AXA Group), Trenwick America and PXRE.
o SCOR, which ranked No. 15 in 2000, with combined ratios ranging from a low of 112 in 1998 to a high of 160 in 2000, jumped back onto NU's Top-20 U.S. reinsurer list for 2008 after disappearing from the top ranks for several years.
Ranked No. 19 in 2008, with U.S. assumed reinsurance premiums of $358 million (compared to $423 million in 2000), SCOR posted a combined ratio of 100.7 for 2008–equal to the overall industry result.
o In 2000, the top-10 reinsurers together wrote two-thirds of the total assumed reinsurance premium volume, while in 2008, only seven large reinsurers accounted for two-thirds of the total volume.
o In 2000, the top-25 wrote 89 percent of the U.S. reinsurance premium total, while the top-25 in 2008 commanded a 97 percent share of the overall U.S. reinsurance market.
The dismal combined ratio results for the top-10 reinsurers of 2000 are summarized on the accompanying chart.
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