The reinsurance broker found dividends and buy-backs exceeded netincome in the sector in 2017

Net income was down $12bn for the reinsurance sector last year, broker Willis Re has reported, as the industry paid out billions in catastrophe claims.

Willis Re’s senior executives lined up to deliver their views on the market at the reinsurance broker’s press conference in Monte Carlo.

Dividends and buy-backs exceeded net income in the sector in 2017, Willis Re revealed.

Insurance linked securities and the third-party capital powering them continued its “inexorable rise”, noted Mark Hvidsten, deputy chairman of Willis Re.

The extent to which the new capital is transforming the sector was revealed in a telling comment from Andrew Newman, president, Willis Re.

“We debated whether or not to remove the word reinsurance from our business, because it doesn’t realty describe what we do any more,” said Newman.

Excess capacity and strides taken in data, analytics and modelling for risk-based rates have created a ceiling as well as a floor on potential pricing, he suggested.

“It creates floors, by which it does not make sense to go beyond them,” said Newman. “Capital has flattened the upside and modelling has flattened the floor. It’s human nature versus cold hard financial analysis.”

The reinsurance sector had an aggregate combined ratio of 107.4% last year, Willis Re revealed, and a normalised return on equity of just 1.4%, down from 8.2% in 2016.

James Kent, CEO of Willis Re, noted that – despite data and modelling – while everybody wants sustainable pricing, but market forces tend to carry the day.

“Reinsurance is a contact sport. It’s a challenge for us and for all our clients,” said Kent. “Resilience, stability and continuity are what they want from a capital perspective.”