Research

Willis Re Reinsurance Market Report April 2018: Results for year-end 2017

Reinsurer capacity remains stable despite 2017 catastrophe loss activity and stress on underlying performance

April 23, 2018
| United Kingdom, United States
Now in its fourth year, the report provides in-depth analysis of the size and performance of the reinsurance industry, based on the Willis Reinsurance Index group of companies.

Key findings:

Nighttime aerial view of roundabout
  • Shareholders’ equity in 34 reinsurance companies tracked in the Willis Reinsurance Index increased 7.8% to USD 371 billion at year-end 2017 despite catastrophe losses which led to a weighted combined ratio for the tracked reinsurers of 104.8%, up 10.4 percentage points from the previous year.
  • Alternative capital also increased to USD 88 billion (Year-end 2016: USD 75 billion), despite the draw-down of some catastrophe bonds and collateralized reinsurance and retrocession layers in the wake of the 2017 Atlantic hurricanes.
  • The rise in equity was driven by unrealized investment gains of USD 34.7 billion. However, when National Indemnity is excluded from the group, the total shareholders’ equity was roughly stable, at USD 343.7 billion.
  • The Index delivered return on equity of 3.4%, down from 8.0% in 2016, after their aggregate net income fell to USD 12.0 billion (2016: USD 26.6 billion).
  • Profitability was also heavily reliant on significant realized investment gains of USD 9.7 billion, up 38.6% from 2016.
  • Underwriting losses were again partly offset by high prior-year reserve releases. Notably, capital of USD 15.6 billion was returned by the reinsurers through dividends (USD 11.2 billion) and share buybacks (USD 4.4 billion) far exceeding the aggregate net income of USD 12.0 billion.
  • In a new combined ration analysis, Willis Re compared 2017 with the severe catastrophe-affected years of 2005 and 2011. The analysis of a subset of reinsurers (i.e., companies which provide the relevant disclosure in relation to cat losses and prior year reserve releases) shows that the Ex-Cat Accident Year combined ratio deteriorated further to 94.6% in 2017 from 90.2% in 2011 and 89.2% in 2005, the last two major loss years.

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