A.M. Best Special Report on Global Reinsurance Industry: How Relevant Is The Underwriting Cycle?

OLDWICK, N.J.--()--A.M. Best has released its annual segment review of the global reinsurance industry, which includes a ranking of the top 50 global reinsurance groups and geographic breakouts of reinsurance segments. The Best’s Special Report, titled, “How Relevant Is The Underwriting Cycle?” states that capital continues to be drawn to the reinsurance industry despite the fact that fundamentals are trending in the wrong direction. The report also explores whether the traditional underwriting cycle has grown distorted and notes that the flurry of convergence capital has triggered behavioral changes by the market’s traditional players with more company names appearing for the first time on reinsurance programs in atypical geographies. A.M. Best recently revised its ratings outlook on the global reinsurance industry to negative from stable.

Other topics the report covers include as follows:

  • Investors continue to turn toward catastrophe bonds to improve investment performance, despite risking the entire principal over a relatively short-term period. The report notes a pattern in the catastrophe bond market: the increasing value of certain bond issues and declining coupon payments. In 2013, 30% of the issues increased in size before the deal was completed. So far in 2014, 39% of the issues have increased in size, implying a continued increase in demand for certain market offerings. At the same time, 51.2% of catastrophe bonds issued in 2013 had a coupon payment of 500 basis points or better. That number has dropped to about 42.2% so far in 2014.
  • Most traditional reinsurers maintained their market share, according to A.M. Best’s annual top 50 ranking of global reinsurance groups in 2013. The majority of movement occurred among the ranking’s bottom two-thirds. The only change in the top 10 was SCOR S.E. advancing ahead of Berkshire Hathaway Inc. for the No. 5 slot. The top three companies in the ranking are Munich Reinsurance Co., Swiss Re Ltd. and Hannover Rueckversicherung AG.
  • Lloyd’s continues to be a significant writer of catastrophe and reinsurance business, with reinsurance representing 36% of gross premiums in 2013; however, after several years of reinsurance premiums increasing, particularly after the catastrophe-affected years of 2010 and 2011, gross premiums fell 3% in 2013 from 2012, reflecting softening market conditions.
  • Most Asian reinsurers’ results were favorable in 2013, but a dramatic softening of the market, in line with the global market, along with consolidation, may increase potential volatility.
  • The underwriting performance of MENA (Middle East & North Africa) domiciled reinsurers is varied. Those companies that have a strong presence in a single market, benefiting from compulsory cessions or have limited their exposure, have demonstrated a track record of profitability.
  • Africa’s highly competitive insurance markets continue to attract scrutiny and rising interest from around the world, particularly from parties in the United States and Europe. Also, a number of African economies are growing faster than their mature counterparts, with demand being boosted by energy, construction and mining projects.

To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=228458.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Greg Reisner, 908-439-2200, ext. 5224
Managing Senior Financial Analyst
greg.reisner@ambest.com
or
Robert DeRose, 908-439-2200, ext. 5453
Vice President
robert.derose@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Greg Reisner, 908-439-2200, ext. 5224
Managing Senior Financial Analyst
greg.reisner@ambest.com
or
Robert DeRose, 908-439-2200, ext. 5453
Vice President
robert.derose@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com