Artex on the state of the global reinsurance market

Artex on the state of the global reinsurance market | Insurance Business Asia

Reinsurance

Artex on the state of the global reinsurance market

The year’s transition saw a significant shift in risk appetite, CEO says

Reinsurance

By
Kenneth Araullo

Artex Capital Solutions reports that global reinsurers experienced a notable improvement in underwriting profitability and return on equity (ROE) in 2023, contributing to an increase in their capital base.

Many companies reported some of the best reinsurance underwriting conditions in over two decades. The redistribution of risk between primary and secondary markets in property catastrophe and specialty segments has driven a substantial improvement in ROEs for reinsurers.

Underlying ROEs rose significantly, ranging from 12% to 14.3% for the year. This increase was due to a reduction in the underlying combined ratios and higher recurring investment income. The underlying combined ratio continued its downward trend, decreasing from 98.5% to 96%, driven by a lower attritional loss ratio and a normalized natural catastrophe load.

Artex notes that whether viewed on a headline or underlying basis, reinsurers’ ROEs now comfortably exceed the industry’s cost of capital. Given recent rate increases and reinvestment rates, it is likely that reinsurers’ underlying ROEs will continue to trend upwards and remain significantly above the cost of capital.

Global reinsurance dedicated capital totaled $729 billion at the end of 2023, an increase of 12% compared to the restated full-year 2022 base. This growth was driven by both traditional reinsurance companies and non-life alternative capital.

At the April 1 renewals, the reinsurance market continued its “risk on” approach seen at the January 1, 2024, renewal. This resulted in increased capacity at the top end of programs and an incremental improvement in risk-adjusted pricing.