2017 reinsurance market briefing - am best · 2017-09-15 · top 10 global reinsurance groups –...
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2017 Reinsurance Market Briefing Greg Carter Managing Director, Analytics
Greg Reisner Director
Robert DeRose Senior Director
Les Rendez-Vous de Septembre, Monte Carlo
10 September 2017
Nick Charteris-Black Managing Director, Market Development A.M. Best EMEA
Disclaimer
2017 Reinsurance Market Briefing, Monte Carlo 2 10 September 2017
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Disclaimer
2017 Reinsurance Market Briefing, Monte Carlo 3 10 September 2017
US Securities Laws explicitly prohibit the issuance or maintenance of a credit rating where a person involved in the sales or marketing of a product or service of the CRA also participates in determining or monitoring the credit rating, or developing or approving procedures or methodologies used for determining the credit rating.
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Any queries of a commercial nature should be directed to A.M. Best’s Market Development function.
Discussion Outline
2017 Reinsurance Market Briefing, Monte Carlo
Global Reinsurance Results and Trends
Market Capacity
Global Market Developments
Reinsurance Sector Outlook
4 10 September 2017
Plus ça change…
2017 Reinsurance Market Briefing, Monte Carlo
Negative interest rates
The United States, the world’s largest economy, has debt/GDP over 100%
The United Kingdom voted to leave the European Union
Terrorism seems to be rampant around the world
Housing bubbles in many parts of the world
Stock Markets are hovering near all-time highs
5 10 September 2017
…plus c’est la même chose
2017 Reinsurance Market Briefing, Monte Carlo
Global Reinsurance Results and Trends
6 10 September 2017
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 7 10 September 2017
60.2% 55.9% 56.2% 56.2% 60.6%
62.2%
57.8%
31.6% 31.9% 33.5% 34.8%
34.7% 32.6% 33.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017 Q2 5yr Avg
Expense Ratio
Loss Ratio
Loss ReserveDevelopment
Source: A.M. Best data and research
93% 87% 87%
91% 92% 93%
2012 2013 2014 2015 20162017 Q2
91% 87% 88% 90%
98%
2012 2013 2014 2015 2016 2017Q2
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 8 10 September 2017
Combined Ratios by Reinsurance Sector
European “Big Four” U.S. & Bermuda Lloyd’s
Source: A.M. Best data and research
91% 89% 92% 92% 96% 97%
0%
20%
40%
60%
80%
100%
120%
2012 2013 2014 2015 2016 2017Q2
Loss Ratio Expense Ratio
Return on Equity (2012 to present) and Five-Year Average
12.4% 13.0% 11.6%
9.5% 8.2% 8.1%
0%
2%
4%
6%
8%
10%
12%
14%
2012 2013 2014 2015 2016 2017 Q2
Return on Equity Five-Year AverageSource: A.M. Best data and research
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 9
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 10 September 2017
European “Big Four” U.S. & Bermuda Lloyd’s
Return on Equity by Reinsurance Sector
13.0% 13.1% 11.0% 11.5%
9.7% 8.1%
0%
5%
10%
15%
20%
2012 2013 2014 2015 2016 2017Q2
10.6% 11.4%
10.9% 7.5% 6.8%
8.1%
2012 2013 2014 2015 2016 2017Q2
15.1% 16.2% 14.7%
8.9% 8.1%
2012 2013 2014 2015 2016 2017Q2
Source: A.M. Best data and research Five-Year Average
Global Market Trends
10.9%
6.8%
0%
2%
4%
6%
8%
10%
12%
Five -Year AverageReturn on Equity
Five -Year AverageReturn on Equity
Excluding Loss ReserveDevelopment
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 11
Source: A.M. Best data and research
Global Reinsurance Market
Operating Cash Flow as a Percentage of Equity
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 12
15.0%
10.0%
13.3% 12.4% 12.4%
4.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2012 2013 2014 2015 2016 2017 Q2
Source: A.M. Best data and research
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 13 10 September 2017
European “Big Four” U.S. & Bermuda Lloyd’s
Operating Cash Flow as a Percentage of Equity by Reinsurance Sector
Source: A.M. Best data and research
19.2%
11.4%
17.9% 17.1% 15.4%
5.5%
0%
5%
10%
15%
20%
2012 2013 2014 2015 2016 2017Q2
10.9% 10.4%
11.4%
9.7% 9.9%
2.9%
2012 2013 2014 2015 2016 2017Q2
13.2%
5.4% 6.0% 7.2%
10.9%
2012 2013 2014 2015 2016 2017Q2
2017 Reinsurance Market Briefing, Monte Carlo
Market Capacity
14 10 September 2017
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 15
Top 10 World's Largest Reinsurance Groups Reinsurance
Premiums Written Total Life & Non-Life (USD m) Non-Life Only (USD m) Shareholders’ Ratios
Gross Net Gross Net Funds Loss Expense Combined Swiss Re Ltd. 35,622 33,570 21,878 21,430 35,716 61.3% 33.6% 94.8% Munich Reinsurance Company 33,154 31,891 18,784 17,931 33,493 63.3% 32.4% 95.8% Hannover Ruck SE 17,232 15,192 9,699 8,414 10,264 66.8% 27.2% 94.0% SCOR S.E. 14,569 13,238 5,942 5,323 7,055 59.5% 33.6% 93.1% Berkshire Hathaway Inc. 12,709 12,709 8,037 8,037 286,359 N/A N/A 89.4% Lloyd's 11,576 8,694 11,576 8,694 34,101 53.2% 39.2% 92.3% Reinsurance Group of America Inc. 10,107 9,249 N/A N/A 7,093 N/A N/A N/A China Reinsurance (Group) Corporation 7,857 7,517 3,342 3,262 10,384 64.4% 37.5% 101.9% Great West Lifeco 6,195 6,112 N/A N/A 13,857 N/A N/A N/A Korean Reinsurance Company 5,554 3,903 4,880 3,312 1,755 81.7% 17.6% 99.2%
Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2016
Global Market Trends
Swiss Re Ltd.
Munich Reinsurance Company
Lloyd's
Hannover Ruck SE
Berkshire Hathaway Inc.
SCOR S.E.
Transatlantic Holdings, Inc
Everest Re Group Ltd.
PartnerRe Ltd.
XL Group plc
Top 10 Global Reinsurance Groups – Non-Life
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 16
Top 10 Global Reinsurance Groups – Life
Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2016
Munich Reinsurance Company
Swiss Re Ltd.
Reinsurance Group of America Inc.
SCOR S.E.
Hannover Ruck SE
Great West Lifeco
Berkshire Hathaway Inc.
Pacific LifeCorp
PartnerRe Ltd.
Assicurazioni Generali SpA
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 17
Life and Non-Life Reinsurance GPW Distribution by Ranking
Rank 1-10 68.6%
Rank 11-20 16.0%
Rank 21-30 7.6%
Rank 31-40 5.0%
Rank 41-50 2.8%
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 18
Estimate for Total Dedicated Reinsurance Capacity (USD billions)
320 340 332 345 355
48 60 68 75 80
2013 2014 2015 2016 2017E
ConvergenceCapacity
TraditionalCapacity
Notes and Sources: Estimates by Guy Carpenter and A.M. Best
Global Market Trends
0
10
20
30
40
50
60
70
80
90
Direct InstitutionalInvestors
Reinsurance SponsoredManagers
Dedicated Insurance-linked securities (ILS)Managers
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 19
Convergence Capacity (2017 estimated) (USD billions)
Notes and Sources: Estimates by Guy Carpenter and A.M. Best
2017 Reinsurance Market Briefing, Monte Carlo
Global Market Trends
10 September 2017 20
Total Economic and Insured Losses – H1 2017 and H1 2016 (USD billions)
Source: Swiss Re Institute
H1 2017 H1 2016
Annual Change
(%) 10-Year Average
% of 10-Year Average
Economic Losses Economic Losses
Natural Catastrophe 41 110 -63 112 Man-made 3 7 -57 8
Economic Losses - Total 44 117 -62 120 Insured Losses
Natural Catastrophe 20 30 -33 29 26 Man-made 3 6 -50 4 50
Insured Losses - Total 23 36 -36 33 28
2017 Reinsurance Market Briefing, Monte Carlo
Global Market
Developments
21 10 September 2017
London Market
2017 Reinsurance Market Briefing, Monte Carlo
UK ILS Reform
Mergers & Acquisitions
Brexit Plans
22 10 September 2017
Brexit Plans
2017 Reinsurance Market Briefing, Monte Carlo 23 10 September 2017
Insurers Unveil Choices for European Offices
Source: A.M. Best data and research
Regulatory Uncertainty
2017 Reinsurance Market Briefing, Monte Carlo
Covered agreement
Potential U.S. tax reform
Has regulation peaked?
24 10 September 2017
Global Market Trends Client Agent &
Broker
Primary Insurance Company
Reinsurance Broker
Reinsurance Company
Convergence Capital
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 25
In A.M. Best’s opinion…
The market will continue to become more efficient as all players strive to
become closer to the client
Global Market Trends
Traditional Dual Platform
Control the client
Build primary business
Alternative Capital Platform
Manage or have a relationship with
alternative capital
Build fee income stream
Mergers & Acquisitions
Relevance and size
Ability to be small and nimble with
parental protection
Strategy Evolution
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 26
Global Market Trends
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 27
Potential Opportunities
Cyber Insurance Flood Mortgage Terrorism InsurTech
Reinsurance Sector Outlook
2017 Reinsurance Market Briefing, Monte Carlo 28 10 September 2017
A.M. Best Maintains Negative Outlook
Capitalisation remains strong but…
Performance has been deteriorating and pressure on margins continues to mount
Returns for some reinsurance companies will fall short on a risk-adjusted basis
Headwinds
Convergence capital pressure
Intense competition
Earnings under pressure
Slippage in terms & conditions
Tailwinds
Favourable reserve development
Benign catastrophes
Increased cessions
2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 29
Q&A
2017 Insurance Market Briefing – Europe and Methodology Review Seminar
10 September 2017 2017 Reinsurance Market Briefing, Monte Carlo 30
Wednesday 15 November 2017: 2017 Insurance Market Briefing – Europe 08:30 – 13:00 GMT, followed by lunch Methodology Review Seminar 14:00 – 16:00 GMT
etc. venues St Paul's, London 200 Aldersgate, London, EC1A 4HD
EMEA Market Overview ● Protectionism ● Brexit ● Mergers & Acquisitions ● Reinsurance Panel
Overview - Structural Changes to Best's Credit Rating Methodology ● Process, Feedback & Outcomes ● Analysis of Impact
There is no cost to attend the Briefing or Seminar, but registration is required as space is limited.
2017 Reinsurance Market Briefing Greg Carter Managing Director, Analytics
Greg Reisner Director
Robert DeRose Senior Director
Les Rendez-Vous de Septembre, Monte Carlo
10 September 2017
Nick Charteris-Black Managing Director, Market Development A.M. Best EMEA