"Big Four" European reinsurers faring well through COVID; keeping strong capital adequacy

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“Big Four” European reinsurers prospering via COVID; maintaining solid resources competence

“All four [of the major European reinsurers] suffered in the first half of 2020, but to varying degrees,” claimed Mazzuoli. “That can be clarified most importantly by the direct exposure that they each need to COVID-19 insurance claims. For instance, when you check out death insurance claims, we have actually seen the greatest quantity of insurance claims at Swiss Re as well as SCOR– both of whom have leading market placements in the United States, where death insurance claims have actually been one of the most extreme. On The Other Hand, Hanover Re as well as Munich Re have reduced market shares in the United States as well as for that reason additionally reported much reduced death insurance claims since H1.

“On the P&C side, all four reinsurers have been impacted quite substantially. [In H1], we saw $1.4 billion of claims reserves in P&C reinsurance at Munich Re, $1.5 billion at Swiss Re, $600 million at Hannover Re, and then $250 million at SCOR. So, everything taken together, we can see that earnings have suffered, but capital has held up quite well so far.”

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The reinsurers have actually preserved resources competence by means of what Fitch calls “prudent risk management practices” as well as proceeded accessibility to economic markets. For instance, Munich Re as well as Swiss Re both executed share buy-backs, Hanover Re as well as Swiss Re released bonds subordinated to resources, as well as SCOR suggested that no returns be dispersed for the 2019 , instead requesting the whole revenue for that year to be assigned to distributable profits.

“We haven’t seen any major reserve releases to buffer [their increased combined ratios], and that is a good sign because it means the reserve strength has remained intact,” Mazzuoli commented. “What we have seen though is different fortunes when it comes to Nat CAT claims. Hanover Re and Munich Re had a very light first half [in terms of Nat CAT claims], so that could be used to buffer the COVID-19 claims to some extent. On the other hand, Swiss Re still had some Nat CAT claims that came in, which meant that the budget had to be used [and] could not be re-used to cater for COVID-19 claims.”

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When it comes to stabilized mixed proportions – which in this instance, indicates that Fitch readjusted for COVID-19 insurance claims as well as for Nat FELINE declares that were listed below or over the budget plan as well as phenomenal book launches– all 4 reinsurers executed likewise in H1, balancing in the 97% variety, contrasted to 99% -100% the year prior. Mazzuoli connected this to the boost in costs as an outcome of the solidifying market, which is beginning to “feed through slowly into the underlying technical results” of the reinsurers.

“The return on investments (ROI) have declined for all four reinsurers [in the first half of the year …] now at about 2.7%-2.8% on average,” Mazzuoli included. “We saw no big realized gains in the first half, which is quite good because these reserves have remained on the balance sheets. The hiccup we saw in March and April where financial markets had suffered from the COVID-19 pandemic – most of that was recovered by half year, and so we did not see any big write downs. The ROI numbers will certainly continue to go down structurally because the reinvestment yields at the moment are far below the average yields on the portfolio.”

Altogether, the “Big Four” made out reasonably well via the initial fifty percent of the year. 3 out of the 4 benefited from excellent market problems to boost their profiles in the June/July revivals, with the exemption being SCOR, which “continued their portfolio pruning,” in words of Mazzuoli. SCOR did, nonetheless, see reasonably high rates renovation in those revivals, mirroring a fad that Fitch has actually seen in the international reinsurance industry for the previous couple of quarters.

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