Top reinsurers achieve COR of 94% in H1 - Gallagher Re

In its latest report on the global reinsurance market, Gallagher Re finds that premium growth averaged 12% in the first half of the year, supported by continued favourable pricing for commercial lines and reinsurance business.

The strongest increases came from global reinsurers (+18%) and North American and Bermudan (re)insurers (+14%). 

H1 underwriting results remained strong with a 94.1% combined ratio (H1 21: 93.8%), supported by higher premiums, lower natural catastrophe loss impact, higher prior year reserve development, and a lower expense ratio. These positive factors were offset by a higher attritional loss ratio.

“Continued pricing gains for commercial lines business remained the key driver of premium growth in Q2,” continued Gallagher Re.

”Apart from Swiss Re which was down 4%, all companies we track showed a year-on-year increase in premium. Additionally, Q2 premium increases tended to be higher than those in Q1.”

It described half year results as “exceptionally strong”, with an average combined ratio of 94.1% and all but three (re)insurers posting a sub-100% combined ratio, noted the reinsurance broker.

”This level of profitability is broadly in line with the 93.8% from H1 2021, supported by the above noted 12% growth in H1 premium, lower natural catastrophe loss activity (partly due to a lighter Q1 compared to the Texas Freeze affected 2021), higher prior year reserve development, and a lower expense ratio.

”These positive factors were offset by a higher attritional loss ratio, due in part to a rise in personal lines loss trends.

”Although not a significant driver of overall H1 results, some (re)insurers established reserves for claims exposure relating to the war in Ukraine. Significant uncertainty remains around ultimate loss estimates and we will continue to monitor these exposures as claims emergence becomes clearer,” it added.

Less rosy on the investment side

Unrealised investment depreciation contributed to a drop in average ROE to 9.3% at H1 (H1 21: 13.9%).

European solvency improved to 235% (H1 21: 222%), supported by rising risk-free interest rates and retained profits.

However, shareholders’ equity reduced by an average of 22% in H1, driven by lower market values of bonds and equities held by global (re)insurers. All the segments tracked by Gallagher Re declined, with Europeans (-28%) and Global Reinsurers (-25%) dropping most significantly.

The main driver of this decline was a rise in interest rates which resulted in lower market values of bonds and equities held by global (re)insurers. The most impacted companies are those with long duration bond portfolios and high allocation to equities.

Capital return through dividends and buybacks also contributed, albeit less significantly, to lower shareholders’ equity.