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Global (re)insurance: capitalisation strong but low interest rates continue to weigh

Insurance Consulting and Technology|Reinsurance
Insurer Solutions|COVID 19 Coronavirus

December 8, 2020

Willis Re’s Strategic and Financial Analytics teams continue to monitor the financial impact on investment markets and global reinsurer 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

  • We estimate that asset-side support to global reinsurers’ shareholders’ equity is now +3% YTD.
  • Solvency capital, however, is constrained by falling interest rates.
  • Capital raising has continued in Q4. We estimate that COVID-19 related capital raising by global (re)insurers totals $19b and a further $3b is being contemplated and/or is in progress.
  • Pending legal rulings are one factor in the continued uncertainty around ultimate COVID-19 related losses. Booked losses in the first nine months of 2020 totalled $20b, which remains considerably below the c.$68b mid-point of top-down industry loss estimates.
  • While falling interest rates provide an immediate constraint on solvency, their impact on earnings will be longer term. Overall, we see the decline in already low interest rates as a key long-term challenge for (re)insurers.
  • Third quarter written premium bounced back from second quarter declines, as COVID-19 lock-downs re-opened, but we can expect another dip if second wave induces renewed lock-downs. Positive rate momentum continues to provide a strong offset to low and volatile exposure growth.
Contacts

Brian Shea
Willis Re
Managing Director, Strategic and Financial Analytics

Ralph Cagnetta
Executive Vice President, North America

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