Reinsurer returns on equity more realistic at 5.9%
Saturday, 05 09 2015, Category: Insurance and Reinsurance, Country: World
The return on equity figures that reinsurance firm’s have been reporting recently have been artificially boosted by low levels of catastrophe losses as well as positive prior year reserve releases, according to a new report from broker Willis Re.
Underlying returns on equity (RoE) are in reality much lower than the 11.5% aggregate, from companies providing a catastrophe loss disclosure, that Willis Re has recorded from reinsurers included in its newly launched Willis Reinsurance Index.
The aggregate reported is a healthy figure, but Willis Re has calculated that a more realistic representation of reinsurer performance may be to assume a more typical catastrophe loss year and to exclude prior year reserve releases.
When these adjustments are applied, the 11.5% return on equity aggregate drops to just 5.9%, a level that would clearly be inadequate for many shareholders if reinsurers were to report such a figure.