Investment markets and global (re)insurer capital positions

We are pleased to share with you Willis Re’s latest assessment of global (re)insurers’ financial health. This short report has been prepared by Willis Re’s Strategic and Financial Analytics teams.

Key takeaways:

• The recovery in investment markets has completely neutralized the asset-side hit to global reinsurer capital positions we had estimated earlier this year.
• Capital positions for (re)insurers globally are in good shape, although solvency ratios for the Europeans have seen more of an L pattern than a V year to date.
• Capital raising continues; we calculate COVID-related capital raising of $14b to date by insurers and reinsurers globally, with a further $6b being contemplated and/or in progress.
• There remains uncertainty, however, on COVID-19 losses, with a wide gap between bottom-up loss announcements of $16b and top-down industry loss estimates of $30-100b.
• While balance sheets are in good shape for most (re)insurers, ROEs are under pressure due to lower investment yields.
• COVID-19 has meaningfully dampened premium income in Q2, but rate increases plus an expected rebound in 2021 GDP may contain this decline.