Cat risk appetite returns to European reinsurers: Best
Cyber, marine and engineering cover also a focus for growth
Europe’s largest four reinsurers have “good appetites” for property catastrophe risks again in 2024, driven by continuing hard reinsurance market conditions, according to AM Best.
In a market report on the big four European reinsurers – Munich Re, Swiss Re, Hannover Re and Scor – the analyst said “the mood has shifted somewhat to focus on taking advantage of the good pricing while it lasts”.
However, it added that the reinsurers have yet to change their stance on higher attachment points for property cat risks, while continuing to side-step aggregate covers and working layers.
At the same time, the big four are also looking to grow in specialty lines, with particular focus on cyber, marine and engineering insurance and reinsurance.
“Growth in these lines is aimed at achieving increased levels of diversification and more stable earnings,” AM Best said.
While concerns about adverse developments in US casualty remain for the cohort, AM Best said this appears to be limited to years 2014-2019.
Head of the Rendez-Vous de Septembre on Monte Carlo, AM Best said comparisons between the big four European reinsurers is difficult because of a split in accounting methods. Munich Re, Hannover Re and Scor all reported under the new IFRS 17 for 2023, while Swiss Re used US GAAP. But AM Best said all companies continued to report good results for non-life reinsurance segments last year and for the first half of 2024, driven by strong pricing and terms alongside below-budget catastrophe and large losses .
The analyst also noted that Europe’s big four reinsurers on average reported lower, but more stable, return on equity last year than their US, Bermuda and Lloyd’s rivals.
All four players have further strengthened non-life loss reserves but have diverged over retrocession strategies, AM Best said, with Munich Re making relatively little use of retrocession compared with its three peers.
“Swiss Re has shifted in recent years to increase its use of retrocession protection, while significant use of retrocession has long been a feature of Scor and Hannover Re’s strategies,” said the ratings agency.
But all four have tapped into the ILS market as part of their retrocession strategies across cat bonds, collateralised reinsurance, sidecars and industry loss warranties, it added.
