Below-Average CAT Losses Boost Reinsurer Profitability

According to the latest information from Fitch Ratings, Fitch-monitored reinsurers grew by 11.3 percent in the first half of 2019, with underwriting profitability boosted by below-average catastrophe losses.

The 16 Fitch-monitored reinsurers posted a combined ratio of 94.6 percent on an aggregate reinsurance calendar year, up slightly from 92.7 percent for the prior year due to adverse development on Typhoon Jebi losses.

Fitch expects the firm market will continue through the January 2020 renewal period, and reinsurers will retain more capital in the near term on the back of more favorable pricing.

"Even with the costliest successive years on record of catastrophe losses in 2017 and 2018, overall pricing remains inadequate and well below recent risk-adjusted levels," said Brian Schneider, senior director of reinsurance at Fitch.

Globally, reinsurance catastrophe losses narrowed to $15 billion in the first half of 2019 from $23 billion in the first half of 2018 and the $31 billion 10-year average for the first half of the year. However, additional 2019 losses should not be ruled out.

Similarly, slower cat bond issuance hindered the insurance-linked securities (ILS) market in the first half of 2019 to one of the lowest levels seen in a decade. While ILS funds continue to attract new capital, the pace is more measured compared with 2018.