Gallagher Re publishes Reinsurance market report for full-year 2022 and “1st View” report for April 2023 renewal

11 April 2023

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ICMIF Supporting Member Gallagher Re has published its Reinsurance market report for the full-year 2022.

The report provides in-depth analysis of the size and performance of the reinsurance industry, based on the Gallagher Reinsurance Index group of companies.

Key findings of the 2022 Reinsurance market report are:

  • Global reinsurance dedicated capital totalled USD 638bn at full-year 2022. This is down 12% from the restated 2021 base, driven by a decline in the value of investments.
  • This US GAAP / IFRS accounting view, however, masks that in economic terms solvency remained strong and in fact generally increased during the year.
  • Gallagher Re’s in-depth analysis of a subset of 16 reinsurers shows the reported combined ratio was broadly stable at a healthy 97.8%. On an underlying basis, the combined ratio improved for the third year in a row, from 99.7% to 98.8%.
  • While the reported ROE declined from 11.4% to 6.8% due to a swing in investment gains (a strong tailwind in 2021, a strong headwind in 2022), underlying results improved.
  • The underlying ROE jumped from 6.3% to 11.2%. This large swing has been driven by better underwriting results, stronger running investment income and, for 2022, more operating leverage (ie a smaller denominator of shareholders’ equity).
  • Perhaps most notably, for the first time in the past ten years, Gallagher Re calculates an underlying ROE that surpasses reinsurers’ weighted average cost of capital (WACC).

Gallagher Re has also published its latest 1st View report Undimmed resolve. The 1st View report is issued three times a year and delivers the very first view on current market conditions within the reinsurance industry at the key renewal seasons: 1 January, 1 April and 1 July.

The key findings for the reinsurance market at the beginning of April 2023 are:

  • The market has faced similar discipline to that seen at January 1, although with a more intense focus on pricing and contract improvements across all territories and to all business lines
  • Capital remains constrained with limited signs of new capacity entering the market and existing reinsurers facing mark-to-market investment losses
  • In Japan, long term reinsurer relationships, aided by improvements in primary underwriting, led to a better alignment of client and reinsurer expectation
  • The supply/demand dynamic was finely balanced but overall buyers managed to secure sufficient capacity
  • Similar to January 1, the Casualty treaty market remained calm and logical, though continued concern regarding US ‘nuclear’ award verdicts are increasingly coming to light on US casualty placements, including some treaties with incidental US exposures
  • ILS issuance is picking up due to capital constraints in the traditional market, although at higher pricing than traditional indemnity pricing

As a valued Supporting Member of ICMIF, Gallagher Re will be present at the forthcoming ICMIF Meeting of Reinsurance Officials (MORO) in Des Moines (USA) from 6-8 June 2023.

Joshua Knapp, Executive Vice President, Gallagher Re (USA) will participate in the high-level panel discussion in the Current state of the reinsurance market session. This panel will examine the latest hot topics in the reinsurance market and the factors behind the recent challenging reinsurance renewals.

Steven Bowen, Chief Science Officer, Gallagher Re (USA) will take part in a session on Climate, claims and catastrophe modelling in which panellists will share insights on the ways in which climate change is increasing the frequency and severity of natural disasters, and how this is affecting the (re)insurance industry. The session will include latest updates in catastrophe modelling, as well as the emerging threat of secondary perils.

Finally, Andrew Johnston, Global Head of Insurtech, will join the session on innovation and insurtech in which insights and case studies will be shared looking at how technology is transforming the insurance landscape and creating new business models for insurers to engage with customers and manage risk more effectively.

For member-only strategic content on the cooperative/mutual insurance sector, ICMIF members have exclusive access to a range of online resources through the ICMIF Knowledge Hub.

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