Four Major European Reinsurers Reported Lower Earnings in 2022

The four major European reinsurers—Hannover Rueck SE, Munich Reinsurance Company, SCOR SE, and Swiss Reinsurance Company Ltd.—reported lower earnings for 2022 as high inflation, rising interest rates, and climate-related costs led to lower underwriting and investment results, according to Fitch Ratings.

In a new report, "Different Degrees of Diversification Drive European Reinsurers' 2022 Earnings," Fitch said that the reinsurers' price increases weren't sufficient to offset higher-than-expected claims inflation. That outcome was the result of major losses from weather events and the war in Ukraine often exceeding budgets, record inflation that required reserve strengthening for recent underwriting years, and higher interest rates that lowered fair values for all major asset classes, the rating agency said.

Fitch said the capital positions of the four major European reinsurers remained very strong in 2022 due to a mix of increases in subordinated debt capital, the positive correlation of solvency ratios to higher interest rates, and lower investment risks. Three of the four reinsurers decided to increase capital returns to shareholders, Fitch said.

"The momentum of reinsurance price increases across large parts of the business that were up for renewal in January 2023 accelerated significantly compared with 2022 for all four major European reinsurers," a Fitch statement said. "Property lines of business and those specialty lines affected by the war in Ukraine showed the highest premium rate improvements."

The rating agency said it believes that a hard market environment with prices and terms and conditions favorable to the reinsurers will help improve their underwriting margins in 2023. Meanwhile, however, macro-economic uncertainty and financial market volatility will continue to challenge the reinsurers this year, Fitch said.