2017 Reinsurance Market Briefing - AM Best · 2017-09-15 · Top 10 Global Reinsurance Groups – Non-Life . 2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 16 . Top

2017 Reinsurance Market Briefing Greg Carter Managing Director, Analytics

Greg Reisner Director

Robert DeRose Senior Director

Les Rendez-Vous de Septembre, Monte Carlo

10 September 2017

Nick Charteris-Black Managing Director, Market Development A.M. Best EMEA

Disclaimer

2017 Reinsurance Market Briefing, Monte Carlo 2 10 September 2017

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Discussion Outline

2017 Reinsurance Market Briefing, Monte Carlo

Global Reinsurance Results and Trends

Market Capacity

Global Market Developments

Reinsurance Sector Outlook

4 10 September 2017

Plus ça change…


Negative interest rates

The United States, the world’s largest economy, has debt/GDP over 100%

The United Kingdom voted to leave the European Union

Terrorism seems to be rampant around the world

Housing bubbles in many parts of the world

Stock Markets are hovering near all-time highs

5 10 September 2017

…plus c’est la même chose


Global Reinsurance Results and Trends

6 10 September 2017

Global Market Trends


60.2% 55.9% 56.2% 56.2% 60.6%

62.2%

57.8%

31.6% 31.9% 33.5% 34.8%

34.7% 32.6% 33.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016 2017 Q2 5yr Avg

Expense Ratio

Loss Ratio

Loss ReserveDevelopment

Source: A.M. Best data and research

93% 87% 87%

91% 92% 93%

2012 2013 2014 2015 20162017 Q2

91% 87% 88% 90%

98%

2012 2013 2014 2015 2016 2017Q2



Combined Ratios by Reinsurance Sector

European “Big Four” U.S. & Bermuda Lloyd’s


91% 89% 92% 92% 96% 97%

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016 2017Q2

Loss Ratio Expense Ratio

Return on Equity (2012 to present) and Five-Year Average

12.4% 13.0% 11.6%

9.5% 8.2% 8.1%

0%

2%

4%

6%

8%

10%

12%

14%

2012 2013 2014 2015 2016 2017 Q2

Return on Equity Five-Year AverageSource: A.M. Best data and research


2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 9




Return on Equity by Reinsurance Sector

13.0% 13.1% 11.0% 11.5%

9.7% 8.1%

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016 2017Q2

10.6% 11.4%

10.9% 7.5% 6.8%

8.1%

2012 2013 2014 2015 2016 2017Q2

15.1% 16.2% 14.7%

8.9% 8.1%

2012 2013 2014 2015 2016 2017Q2

Source: A.M. Best data and research Five-Year Average


10.9%

6.8%

0%

2%

4%

6%

8%

10%

12%

Five -Year AverageReturn on Equity

Five -Year AverageReturn on Equity

Excluding Loss ReserveDevelopment



Global Reinsurance Market

Operating Cash Flow as a Percentage of Equity



15.0%

10.0%

13.3% 12.4% 12.4%

4.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2012 2013 2014 2015 2016 2017 Q2





Operating Cash Flow as a Percentage of Equity by Reinsurance Sector


19.2%

11.4%

17.9% 17.1% 15.4%

5.5%

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016 2017Q2

10.9% 10.4%

11.4%

9.7% 9.9%

2.9%

2012 2013 2014 2015 2016 2017Q2

13.2%

5.4% 6.0% 7.2%

10.9%

2012 2013 2014 2015 2016 2017Q2


Market Capacity

14 10 September 2017



Top 10 World's Largest Reinsurance Groups Reinsurance

Premiums Written Total Life & Non-Life (USD m) Non-Life Only (USD m) Shareholders’ Ratios

Gross Net Gross Net Funds Loss Expense Combined Swiss Re Ltd. 35,622 33,570 21,878 21,430 35,716 61.3% 33.6% 94.8% Munich Reinsurance Company 33,154 31,891 18,784 17,931 33,493 63.3% 32.4% 95.8% Hannover Ruck SE 17,232 15,192 9,699 8,414 10,264 66.8% 27.2% 94.0% SCOR S.E. 14,569 13,238 5,942 5,323 7,055 59.5% 33.6% 93.1% Berkshire Hathaway Inc. 12,709 12,709 8,037 8,037 286,359 N/A N/A 89.4% Lloyd's 11,576 8,694 11,576 8,694 34,101 53.2% 39.2% 92.3% Reinsurance Group of America Inc. 10,107 9,249 N/A N/A 7,093 N/A N/A N/A China Reinsurance (Group) Corporation 7,857 7,517 3,342 3,262 10,384 64.4% 37.5% 101.9% Great West Lifeco 6,195 6,112 N/A N/A 13,857 N/A N/A N/A Korean Reinsurance Company 5,554 3,903 4,880 3,312 1,755 81.7% 17.6% 99.2%

Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2016


Swiss Re Ltd.

Munich Reinsurance Company

Lloyd's

Hannover Ruck SE

Berkshire Hathaway Inc.

SCOR S.E.

Transatlantic Holdings, Inc

Everest Re Group Ltd.

PartnerRe Ltd.

XL Group plc

Top 10 Global Reinsurance Groups – Non-Life


Top 10 Global Reinsurance Groups – Life

Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2016

Munich Reinsurance Company

Swiss Re Ltd.

Reinsurance Group of America Inc.

SCOR S.E.

Hannover Ruck SE

Great West Lifeco

Berkshire Hathaway Inc.

Pacific LifeCorp

PartnerRe Ltd.

Assicurazioni Generali SpA



Life and Non-Life Reinsurance GPW Distribution by Ranking

Rank 1-10 68.6%

Rank 11-20 16.0%

Rank 21-30 7.6%

Rank 31-40 5.0%

Rank 41-50 2.8%



Estimate for Total Dedicated Reinsurance Capacity (USD billions)

320 340 332 345 355

48 60 68 75 80

2013 2014 2015 2016 2017E

ConvergenceCapacity

TraditionalCapacity

Notes and Sources: Estimates by Guy Carpenter and A.M. Best


0

10

20

30

40

50

60

70

80

90

Direct InstitutionalInvestors

Reinsurance SponsoredManagers

Dedicated Insurance-linked securities (ILS)Managers


Convergence Capacity (2017 estimated) (USD billions)

Notes and Sources: Estimates by Guy Carpenter and A.M. Best



10 September 2017 20

Total Economic and Insured Losses – H1 2017 and H1 2016 (USD billions)

Source: Swiss Re Institute

H1 2017 H1 2016

Annual Change

(%) 10-Year Average

% of 10-Year Average

Economic Losses Economic Losses

Natural Catastrophe 41 110 -63 112 Man-made 3 7 -57 8

Economic Losses - Total 44 117 -62 120 Insured Losses

Natural Catastrophe 20 30 -33 29 26 Man-made 3 6 -50 4 50

Insured Losses - Total 23 36 -36 33 28


Global Market

Developments


London Market


UK ILS Reform

Mergers & Acquisitions

Brexit Plans


Brexit Plans


Insurers Unveil Choices for European Offices


Regulatory Uncertainty


Covered agreement

Potential U.S. tax reform

Has regulation peaked?


Global Market Trends Client Agent &

Broker

Primary Insurance Company

Reinsurance Broker

Reinsurance Company

Convergence Capital


In A.M. Best’s opinion…

The market will continue to become more efficient as all players strive to

become closer to the client


Traditional Dual Platform

Control the client

Build primary business

Alternative Capital Platform

Manage or have a relationship with

alternative capital

Build fee income stream

Mergers & Acquisitions

Relevance and size

Ability to be small and nimble with

parental protection

Strategy Evolution




Potential Opportunities

Cyber Insurance Flood Mortgage Terrorism InsurTech

Reinsurance Sector Outlook


A.M. Best Maintains Negative Outlook

Capitalisation remains strong but…

Performance has been deteriorating and pressure on margins continues to mount

Returns for some reinsurance companies will fall short on a risk-adjusted basis

Headwinds

Convergence capital pressure

Intense competition

Earnings under pressure

Slippage in terms & conditions

Tailwinds

Favourable reserve development

Benign catastrophes

Increased cessions


Q&A

2017 Insurance Market Briefing – Europe and Methodology Review Seminar

10 September 2017 2017 Reinsurance Market Briefing, Monte Carlo 30

Wednesday 15 November 2017: 2017 Insurance Market Briefing – Europe 08:30 – 13:00 GMT, followed by lunch Methodology Review Seminar 14:00 – 16:00 GMT

etc. venues St Paul's, London 200 Aldersgate, London, EC1A 4HD

EMEA Market Overview ● Protectionism ● Brexit ● Mergers & Acquisitions ● Reinsurance Panel

Overview - Structural Changes to Best's Credit Rating Methodology ● Process, Feedback & Outcomes ● Analysis of Impact

There is no cost to attend the Briefing or Seminar, but registration is required as space is limited.

2017 Reinsurance Market Briefing Greg Carter Managing Director, Analytics

Greg Reisner Director

Robert DeRose Senior Director

Les Rendez-Vous de Septembre, Monte Carlo

10 September 2017

Nick Charteris-Black Managing Director, Market Development A.M. Best EMEA

Documents

2017 Reinsurance Market Briefing - AM Best · 2017-09-15 · Top 10 Global Reinsurance Groups – Non-Life . 2017 Reinsurance Market Briefing, Monte Carlo 10 September 2017 16 . Top