Improved outlook for global reinsurance sector in 2022
Source: Middle East Insurance Review | Oct 2021
The outlook for the global reinsurance sector is improving for 2022, according to a report by Fitch Ratings. Fitch expects significant improvements in reinsurers’ financial performances due to higher prices in a hardening market, a strong rebound in economic activity and lower pandemic-related losses. These positive factors should outweigh the negative effects of declining investment returns, increasing natural catastrophe claims due to climate change and a temporary pick-up in inflation.
Fitch expects to affirm most reinsurers’ ratings in 2021 and into 2022, barring extreme natural catastrophes. Fitch-rated reinsurers have been well-positioned to absorb pandemic-related losses so far and uncertainty over the ultimate losses is diminishing for three main reasons.
First, the progress on vaccination, particularly in Europe and North America, has reduced the risk of excess mortality claims in life reinsurance. Secondly, infectious disease exclusions in renewed contingency and business-interruption treaties have mostly eliminated the risk of new pandemic-related claims from these business lines. Thirdly, the business interruption losses reported in 2021 have been within expectations factored into ‘incurred-but-not-reported claims reserves’ set aside in 2020.
Fitch expects the sector’s combined ratio, normalised for large losses, to improve by 2–3 percentage points in 2021 and another 1–2 percentage points in 2022 as price increases gradually feed into underwriting margins. “However, price rises are slowing due to strong capital supply and recovering profitability and we expect risk-adjusted prices to remain largely unchanged in 2022,” said the agency. M