Fitch Says Reinsurance Market Saw "Mixed Results" at January Renewals

The reinsurance market showed "mixed results" at January renewals, with only loss-affected lines of business showing significant price increases, according to Fitch Ratings.

In a report, "January 2022 Reinsurance Renewals Mixed on Price Changes," Fitch cited property catastrophe, cyber, and retrocession as among the lines seeing significant increases at January renewals. Meanwhile, loss-free areas such as casualty lines of business saw prices that remained the same or fell at renewals due to an increase in available capacity, the rating agency said.

Fitch said that despite more than $100 billion of natural catastrophe claims, both traditional and alternative reinsurance capital grew 3 to 4 percent in 2021. "The alternative capital space saw very strong inflows into catastrophe bonds, in particular, while traditional reinsurers' capital was helped by a better underlying profitability," a Fitch statement said.

The rating agency said it expects the reinsurance sector to slightly improve its return on capital in 2022 to a level above the high-single-digit return forecast for 2021. This year's return on capital should reach a level "broadly in line" with the reinsurance industry's cost of capital, Fitch said.

Fitch estimated reinsurers should experience risk-adjusted price improvements of 1 percent across the entire reinsurance portfolio in 2022, "assuming a normalized level of natural catastrophe claims." While that would be less than 2021's price gains, it will support the reinsurance sector's improving technical results, the rating agency said.