Global reinsurance market rebounds with $515 billion in capital by 2024 – AM Best

AM Best has released its annual report on the global reinsurance market, highlighting key trends and developments across various regions and sectors.

Last year, the report noted optimism in the global reinsurance sector due to steep price increases and tighter terms in the property/catastrophe market. The life reinsurance industry continues to show strong levels of risk-adjusted capital and liquidity, with mortality rates stabilizing in 2023, though still above pre-pandemic levels.

In June 2024, AM Best issued its first-ever positive outlook for the global reinsurance sector, driven by a renewed focus on technical profitability over the past few years. IFRS 17, which became effective in January 2023, has presented challenges for reinsurers adapting to the new financial reporting standard. As a result, AM Best adjusted its ranking methodology to account for differences in financial reporting standards.

Traditional reinsurance capital saw a sharp decline in 2022 but has since rebounded and is expected to reach $515 billion in 2024. For the first time in four years, reinsurers’ return on equity has exceeded the cost of capital, as both capital gains and underwriting profits have improved.

The non-life segment is expected to see sustained technical profits, supported by de-risking measures, realigned interests between reinsurers and primary carriers, and improved pricing.

In the life and annuity (L/A) reinsurance segment, higher interest rates and moderated mortality since the COVID-19 pandemic have provided a boost. The sector remains well-capitalized and positioned for growth, with reinsurers continuing to evaluate underwriting practices and premium rate increases to mitigate higher claims in certain areas.

The insurance-linked securities (ILS) market has experienced modest capacity growth, aligning with demand. ILS managers have structured transactions to reduce exposure to more frequent severe convective storms.

In 2023, nearly 47% of US life/annuity statutory ceded reserves were transferred offshore, with Bermuda accounting for over one-third of all in-force business and 60% of new business.

Health reinsurance demand has risen due to increasing healthcare utilization and medical inflation. In the US, growth in 2023 was driven by the commercial and stop-loss segments. In Asia, strong growth was tied to expanding economies and the need for healthcare solutions.

Lloyd’s has improved its underwriting results each year since 2020, remaining a critical player in the global reinsurance and specialty markets. Reinsurance accounts for about a third of Lloyd’s premiums.

In Latin America, reinsurers are adjusting to new political landscapes, monetary policies, and global economic conditions, with managing general agents (MGAs) playing an increasingly important role in the value chain.

The Asia-Pacific reinsurance market saw over 10% growth in 2023, driven largely by China Re’s international expansion. To respond to the hard retro market conditions, large reinsurers in the region adjusted their catastrophe capacity to limit exposure.

In the Middle East and North Africa (MENA), reinsurers experienced strong premium growth due to pricing momentum, high inflation, and new business opportunities. In Sub-Saharan Africa, reinsurers leveraged the global hardening rate environment to report strong underwriting profitability despite challenging economic conditions.

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