In the first half of 2022, the world’s globally diversified major reinsurance companies saw some of the strongest reinsurance premium growth, with pricing gains for commercial business a key driver of expansion.
Gallagher Re, a reinsurance broker, reported that premium growth across the reinsurers it monitors averaged 12% in H1 2022, helped by continued favorable pricing for commercial lines and reinsurance business.
However, growth is not evenly distributed across the industry, with some companies seizing opportunities to capitalize on the advantages that global and line of business diversification provides.
The strongest increases in premiums written came from global reinsurance companies, which increased their premiums by 18% in the first half of 2022, indicating that diversification and footprint are strategic advantages for them.
Following that are the North American and Bermudan re/insurers, which grew by 14% in the first half despite being slightly less diverse geographically and in terms of business lines.
“Continued pricing gains for commercial lines business remained the primary driver of premium growth in Q2,” Gallagher Re said.
With premium increases accelerating in the second quarter of 2022, an impressive 9 of the 25 companies Gallagher Re tracks reported a greater than 20% premium increase year on year for that quarter, compared to just 5 at the end of Q1.
The broker notes that a number of management teams expect commercial premium increases to continue to outpace loss cost trends into 2023, but that the average attritional loss ratio increased by 1 percentage point in Q2 2022 compared to the previous year.
Natural catastrophe losses, as a contributor to the average combined ratio across the commercial insurance and reinsurance cohort, also increased in the second quarter.
The average combined ratio for the first half of 2022 was 94.1%, with all but three re/insurers reporting a combined ratio less than 100%.
The nat cat loss ratio decreased by half a percentage point in the first half, but increased by 1.5% in the second quarter to contribute 6% of the combined ratio, with attritional losses increasing by 1% to 61.8%.
This was in a relatively benign quarter for major global catastrophe loss activity, but the frequency of severe weather peril impacts had continued to erode some of re/insurers’ profitability.
Returning to premium growth, it’s worth noting that some of the strongest growth in property lines of business comes from global players, whereas many of those pulling back from property cat risk are in the industry’s middle tier.
However, not all global reinsurers are reducing cat exposure, implying a split in market strategy, as some companies believe they have the underwriting expertise and diversification in their portfolios to absorb catastrophe exposures, even at recent historical rates of frequency and severity.
Following the mid-year reinsurance renewals, there has been a slight adjustment in the industry’s exposure to US coastal wind as a peril, which means that any major storms this year may result in a different distribution of losses across insurance and reinsurance firms, which will be interesting to watch as hurricane season progresses.