Reinsurer reserves releases to shrink
Thursday, 01 28 2016, Category: Insurance and Reinsurance, Country: World
Reserve releases for property & casualty insurance and reinsurance companies are expected to shrink over the next few years, with what was 15% of operating income on average falling to 11%, presenting a real risk to P&C re/insurer earnings, according to Morgan Stanley analysts.
Reserves have been seen to boost insurance and reinsurance profitability in recent years, particularly for the P&C sector, however the contribution that reserve releases make to income and earnings is expected to slow down, with increasing risk seen to companies reserve buffers.
Analysts at Morgan Stanley, led by Xinmei Wang and Jon Hocking, suggest that, as underwriting and investment returns remains depressed, a slow down or shrinking of reserve releases could present not just a threat to earnings, but also an additional pressure to re/insurance company balance sheets.