March 28th, 2018

What the Numbers Reveal about the Current Industry Status. Chapter 2: Insurer Profitability and Retrocession, Part I

Posted at 1:00 AM ET

Chapter 2: How have 2017 losses and the last several years of declining rates impacted reinsurer profitability?  Has increasing prevalence of retrocessional reinsurance, now provided primarily by convergence capital providers, had an impact? Part I.

The Guy Carpenter Global Reinsurance Composite Third Quarter results provided hard data and context for recent industry performance.

The Composite contains 20 reinsurance groups that are representative of the sector.

  • For the nine months ending September 30, 2017, reinsurers in the Guy Carpenter Global Reinsurance Composite generated an aggregate combined ratio of 112 percent and return on average equity (ROAE) of zero percent, with storm losses eliminating all of the profitability generated through the first eight months of the year.
  • While some reinsurers added to equity through the first nine months of 2017, 55 percent sustained some decrease driven by Third Quarter catastrophe losses, share repurchases and dividends paid. The increased use of retrocession by reinsurers as they carefully managed their risk and capital in the challenging rate environment, helped limit the impact on earnings and capital.