Global reinsurance capital, profits, and ROE on the rise in H1: Willis Re
September 08 2021 - 2:30AM
Global reinsurers performed well in the first half of 2021, with a
further expansion of their capital bases and strong headline
underwriting results and ROEs. Underlying ROEs, while less strong,
were nonetheless noticeably improved, according to the latest
Reinsurance Market Report from Willis Re, the reinsurance business
of leading global advisory, broking and solutions company Willis
Towers Watson (NASDAQ: WLTW).
Total capital dedicated to the global
reinsurance industry measured USD 688 billion after the first six
months of 2021, reflecting a 4% increase from 31 December 2020.1
The rise was driven primarily by strong net income. To fuel organic
growth in the positive rating environment, reinsurers typically
retained more income than has been usual in recent years.
Reinsurers together achieved exceptionally
strong premium growth of 15% during H1 2021. Their weighted average
reported combined ratio was 94.1%, which closely matches the
figures reported for the 2016 to 2019 half years. Despite
abnormally heavy natural catastrophe activity so far this year, the
ratio marks a dramatic improvement from the Covid-impacted 104.1%
in H1 2020. Reported combined ratios also benefitted from slightly
higher levels of reserve releases, reversing the trend of declining
releases seen since 2017.
The reinsurers’ underlying half-year combined
ratio, excluding prior year development, and normalising for
natural catastrophe losses, has improved steadily since 2017. This
continued in H1 2021, falling from 98.6% in H1 2020 to 98.4%. A
lower expense ratio supported the improved combined ratios, as
rapid premium growth more than offset rising costs.
The average ROE also rebounded strongly,
assisted by improved investment returns. The reported ROE recovered
from last year’s minus 0.7% to reach 13.9%, while the underlying
ROE more than doubled to reach 6.3%. Nevertheless, the underlying
ROE still remains below the industry’s cost of capital.
James Kent, Global CEO, Willis Re, said:
“Reinsurance providers will be heartened by these results. The
industry has endured several years of below-par performance, capped
by the calamitous experience of COVID-19. Now the remedial work
reinsurers have undertaken over the past several years is bearing
fruit.
“Unfortunately, though, very strong premium
growth in the first half of this year was achieved against combined
ratios which are not much lower than during the softer parts of the
cycle, therefore leaving underlying ROEs still languishing below
the cost of capital.”
Download the full report: The Willis Re
Reinsurance Market Report is a biannual publication providing
in-depth analysis of the size and performance of the reinsurance
market. Analysis is based on the Willis Reinsurance Index group of
companies. In 2021 the Index includes 43 companies from across the
globe.
About Willis Re
One of the world's leading reinsurance brokers,
Willis Re is known for its world-class analytics capabilities,
which it combines with its reinsurance expertise in a seamless,
integrated offering that can help clients increase the value of
their businesses. Willis Re serves the risk management and risk
transfer needs of a diverse, global client base that includes all
of the world's top insurance and reinsurance carriers as well as
national catastrophe schemes in many countries around the world.
The broker's global team of experts offers services and advice that
can help clients make better reinsurance decisions and negotiate
optimum terms. For more information, visit willisre.com
About Willis Towers Watson
Willis Towers Watson (NASDAQ:WLTW) is a leading
global advisory, broking and solutions company that helps clients
around the world turn risk into a path for growth. With roots
dating to 1828, Willis Towers Watson has over 45,000 employees
serving more than 140 countries and markets. We design and deliver
solutions that manage risk, optimize benefits, cultivate talent,
and expand the power of capital to protect and strengthen
institutions and individuals. Our unique perspective allows us to
see the critical intersections between talent, assets and ideas –
the dynamic formula that drives business performance. Together, we
unlock potential. Learn more at willistowerswatson.com
Contact:
Media
Haggie Partners: +44 20 7562 4444 | willisre@haggie.co.uk
_____________________________
1 Willis Re’s Reinsurance Market Index tracks the capital and
performance of reinsurers holding more than 80% of the sector’s
capital. It includes in-depth analysis of the results of a Subset
of 17 reinsurers comprising those which disclose information
sufficient for detailed analysis.
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