Fitch Ratings: Reinsurers recovered from 2021's large-loss events

Global reinsurers experienced large losses in 2021 due to natural catastrophes, secondary perils such as storm surges and mortality claims linked to COVID-19, Fitch Ratings recently reported. However these companies successfully weathered the capital hit thanks to strong earnings and risk-management strategies.

“Despite the high large loss burden, profits… improved substantially in 2021 compared to 2020,” Fitch Ratings analysts Robert Mazzuoli and Brian Schneider wrote in the April 2022 Peer Review of Large Global Reinsurers. Companies included in the analysis were “top tier global reinsurers,” specifically Hannover Rueck SE, Lloyd’s of London, Munich Reinsurance Company, PartnerRe Ltd., SCOR SE and Swiss Reinsurance Company Ltd. They represent the industry’s largest based on premium volume.

Analysts added that the strength of these companies is driven by “a high degree of diversification.”

Reinsurance is insurance for insurers. “It’s a way of transferring some of the financial risk insurance companies assume in insuring cars, homes and businesses,” the Insurance Information Institute explains.

Fitch Ratings reported that the average return on equity (ROE) for global reinsurers increased to 8.3% in 2021 from 2.2% in 2020. “Better prices and lower non-life Covid-19 claims drove the improvements,” the report said. “We expect profits to consolidate in 2022 as further price increases broadly offset inflationary pressures.”

The report concluded that in order to continue facing down large-loss events, reinsurers must stay the course by reserving capital “with prudence and discipline.”

See also:

• Reinsurers maintained pricing momentum as rates moderated
• ILS, traditional reinsurance capital back to pre-pandemic levels
• How the U.S. insurance, reinsurance markets are increasingly reliant on TPAs