Reinsurance Market: Reporting And Evaluation Of Recent Industry Developments

Posted by surendra choudhary on April 9th, 2021

Reinsurance Market - Snapshot

Reinsurance is an arrangement under which the reinsurer company (reinsurer) agrees to protect the insurance company (also known as ceding company) from calamities written under the agreement. Reinsurance is designed to enhance the ceding company’s surplus position and financial strength, and reduce the net amount at risk on specific risks. Reinsurance allows the ceding company to maximize the risk it can underwrite on a single risk and expand the volume of business it can underwrite. The reinsurance includes group and individual critical illness, disability and life & health, and property & casualty (P&C) reinsurance. In terms of end-user, the non-life/property & casualty reinsurance segment accounted for highest market share in 2017 and is estimated to hold the position over the forecast period. To protect their investments, oil and gas, mining, agriculture, and transportation are some of the leading sectors opting for property & casualty reinsurance services. The global reinsurance market is currently driven by a favorable regulatory environment.

The global reinsurance marketwas valued at US$ 241.14 Bn in 2017 and is expected to expand at a CAGR of 4.7% during the forecast period.

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Growth in property catastrophe protection is a major factor expected to drive the reinsurance market. However, lack of disposable income is a major factor restraining the market. Developing countries of Africa have frail economies with resultant low insurance infiltration due to lack of disposable income, and globalization & competition from foreign companies. In South Africa, disposable income per capita is much lower than the OECD average of USD 30,563. Regional economic activities are anticipated to present significant opportunities for the reinsurance market. The United States, China, Germany, Japan, and United Kingdom are some of the countries with the strongest economic growth. Thus, increasing economic activities and public-private collaboration schemes and a movement toward financial stability is offering enormous growth opportunities to the reinsurance market. Local insurers progressively retain premiums. Increased retention is a reflection of insurers’ confidence in their own underwriting. Insurers are starting to retain more risk as it implies that they are concentrating more on the fundamentals, on underwriting, and on their risk selection. However, unrealized investment losses and adverse currency fluctuation have impacted reinsurance capital across all the regions which are however offset by stable operating earnings aided by continued light catastrophe activity.

The global reinsurance market is expected to be further driven by significant growth in Asia Pacific. The region is estimated to constitute a significant market share during the forecast period, with India, Japan, and China contributing most to the region’s revenue. The reinsurance market in Asia Pacific is mainly driven by growth in property catastrophe protection. This is largely because the region has encountered several property losses in the past few years. Moreover, a series of typhoons, floods, earthquakes, and other weather-related losses also impacted the region. For instance, in August 2018, Kerala, a state in India was affected by severe flooding caused by heavy rainfall. The flooding resulted in various property losses and at least a million people were expatriated from their homes. These factors are anticipated to further fuel the demand for reinsurance services around the globe. In the Asia Pacific region, increasing amounts of catastrophe protection are being purchased to secure income instead of essentially ensure capital. As multinational companies have extended their footprintin Asia, they have discovered that country-specific regulatory realities and local practices have occasionally prompted reinsurance decisions that were in conflict with the objectives of the broader multinational group. As a result, reinsurers are advancing to a progressively incorporated or Asia-regionalized reinsurance strategy.

Major players operating in the reinsurance market include Barents Re Reinsurance, Inc., Berkshire Hathaway Inc., BMS Group Ltd., China Reinsurance (Group) Corporation, Everest Re Group, Ltd., Hannover Re, IRB-Brasil Resseguros S.A., Lloyd's, Munich Re, Odyssey Reinsurance, PartnerRe, Reinsurance Group of America, Incorporated, SCOR SE, and Swiss RE Group.