US and Bermuda reinsurers have seen strong operating returns in the 2023 with the conflict in Ukraine contributing to “modest” losses.
The reinsurers’ earnings performance was mainly driven by multiyear increases and a low level of catastrophe losses, said Moody’s.
Reinsurers in this region saw strong underwriting results during the 2023, with Alleghany, Arch, AXIS, Everest Re, PartnerRe and RenaissanceRe reporting combined ratios ranging from 78% to 92%.
At 78%, Arch reported the lowest combined ratio; analysts noted that this was driven by strong performance in the company’s mortgage book.
The strong underwriting performance partially reflected continued favourable pricing conditions in the reinsurance market during the first half, with rate on rate increases and tighter terms and conditions in most property, casualty and specialty lines.
It also led to improved operating returns on equity, which ranged from 11% to 16% for the cohort, analysts added.
Property catastrophe coverages continued to see significant firming, while casualty rate increases moderated but remained above loss costs.
Favourable pricing at the June and July renewals reflected the combination of strong demand for reinsurance coverage coupled with capacity constraints, as reinsurers maintain underwriting discipline and limit risk exposure after several years of weak operating performance and high catastrophe losses.
Casualty reinsurance rate increases also reflected reinsurers’ concern given uncertainties related to future economic and social inflation.
A relatively low level of catastrophe losses during this year’s H1 also helped reinsurers’ earnings performance.
Catastrophes contributed less than four percentage points to the six-month loss ratio for the reinsurers. This reflected reduced worldwide insured natural cat losses of $35bn during 2023 (according to Swiss Re), compared to $46bn during the same period in last year.
Regarding the conflict in Ukraine, it represented $50mn in losses for PartnerRe, $45mn for Everest, $44mn for Alleghany, $30mn for AXIS and $25mn for RenRe.