As Rates Harden, Global Reinsurers Should See Modest Profits in 2021

Fitch Ratings said it expects global reinsurers to post modest underwriting profits in 2021 as increases in reinsurance rates across almost all lines are expected to outpace loss-cost inflation.

A Fitch statement said pandemic-related losses are expected to normalize across nonlife (re)insurance, life, and health reinsurance mortality businesses.

The rating agency said its stable rating outlooks on the global reinsurance and US property-casualty insurance sectors reflect the expectation for hardening pricing and stabilizing pandemic-related claims amid depressed investment due to the low interest rate environment and further deterioration of asset quality.

Fitch said this year's catastrophic events have pushed prices even higher in an already hardening market, with premiums expected to increase at June and July reinsurance renewals, although likely to lose momentum in 2022.

Global reinsurance earnings for the first half of 2021 will likely be pressured by year-to-date catastrophic events such as winter storms in the United States and flooding in Australia, Fitch said. The recent Suez Canal blockage, while expected to result in large losses and higher prices for marine reinsurance, is not likely to materially affect reinsurers' credit profiles, the rating agency said.

Fitch forecasts a 2021 reinsurance combined ratio of 99.1 percent, reflecting 9.0 percentage points average catastrophe losses, 1.5 percentage points for additional COVID-19 losses, and 1.0 percentage points of reserve releases.