Reinsurers only profitable due to low catastrophe
Thursday, 09 15 2016, Category: Insurance and Reinsurance, Country: World
Standard & Poor’s notes that were it not for the benign catastrophe loss experience of recent years and higher reserve releases reinsurers’ return on capital would have failed to exceed cost of capital levels in 2015 and so far in 2016, suggesting that a truly soft market is nearing.
The profitability of global reinsurers has been under threat for some time now, with the cost of capital of reinsurers rated by S&P declining since 2005.
However, in more recent years the benign catastrophe loss experience and substantial prior-year reserve releases has enabled companies to report solid returns in very challenging conditions, which, is masking true operating profitability.