Ukraine & nat cat overtake all but one Big Four reinsurer Q1: Fitch

Three of the world’s top four big reinsurers succumbed to high nat cats and the Russian invasion of Ukraine to post a decline in Q1 earnings, with only one major player leveraging the more diversified portfolio to fight off the trend, the  Fitch ratings agency noted in its wrap-up of Q1 reinsurance earnings reports.

“Elevated natural catastrophe (nat cat) claims and a first round of broad-brush claims reserves for the Russia–Ukraine war ... led to reported combined ratios close to or above 100% in 1Q22,”  Fitch said of the downturn in underwriting income visible at SCOR, Swiss Re and Hannover Re.

Only Munich Re managed to take it the other way on underwriting earnings, leveraging the portfolio to manage a decrease in combined ratio.

“Munich Reinsurance Company’s diverse property portfolio meant it was better able to digest nat cat claims than peers,”  Fitch said.

Combined ratios rose to near 100% for Hannover Re and Swiss Re and topped the mark for SCOR, all well above 91.3% for Munich Re.

A normalized combined ratio for the group deteriorated 3 percentage points year on year to 98% “showing the mounting strain on underwriting results from inflationary pressures.”

On investment earnings, only Hannover Re managed to avoid the Q1 market slaughter. While Swiss Re, Munich Re and SCOR all suffered from the rise in interest rates, Hannover Re took lift from a heavy allocation to inflation-linked bonds.

At the April renewals, all four major reinsurers took advantage of “very good market conditions” to grow non-life books up for renewal by 8% - 20%.

Despite the headline losses and vows to speed its retreat from property cat, SCOR managed to vie with Swiss Re for strongest premiums growth at the April renewal season, well ahead of a more conservative stance from colleagues at Munich Re.

Price increases at the April renewals decelerated further from levels seen at the January renewal season,  Fitch said.

“We expect new business underwriting margins to stabilise for the remainder of this year.”

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