Europe’s four largest reinsurers, Swiss Re, Munich Re, Hannover Re and SCOR, benefited from the tough reinsurance market with better prices and terms and conditions in 2023, and given strong results for the first half of 2024, discipline is likely to continue, according to AM Best.

All four reinsurers reported strong results for their non-life reinsurance segments in 2023, driven by continued strong pricing and terms. The group’s life insurance portfolios also improved last year.

So far, reinsurers have continued to report strong results for their non-life reinsurance business in 2024 as strong pricing and terms continue and catastrophe and large losses remain below budget.

However, French reinsurer SCOR issued a profit warning in July 2024 related to the evolution of its life business, for which the group is currently conducting a review of its provisions.

According to AM Best, the four major European reinsurers have reported lower average returns on equity for 2023 than the US and Bermuda market averages, although European players’ returns on equity tend to be more stable over time.

“Despite SCOR’s recent announcement regarding its life insurance business, their life insurance books have generally had a stabilising effect and the players are very diversified. In addition, unrealised gains and losses on fixed income investments are generally reported in other comprehensive income (OCI) at the big four European reinsurers, but in the income statement at the US and Bermuda players and Lloyd’s. This also leads to less volatility both upwards and downwards in the ROEs of the European players,” says AM Best.

As tough conditions in the reinsurance market continue into 2024, Europe’s big four insurers have strong interest in property and catastrophe insurance business after a period of adjusting their portfolios, increasing tie-ins and moving away from blanket covers and shifts.

“Although there are no signs yet that this discipline is disappearing, the mood has changed somewhat and the focus is on taking advantage of the low prices while they last,” says AM Best.

In addition, the four reinsurers also target growth in specialty segments such as cyber, marine, engineering and other lines of business in both primary insurance and reinsurance.

In the non-life sector, AM Best points out that there are concerns among the four major European reinsurers about an unfavourable development in the US liability books, although this appears to be limited to certain years, namely 2014 to 2019.

“Given the strong operating performance trends, all have taken the opportunity in 2023 and also in 2024 to further strengthen provisions for non-life losses that are largely incurred but unreported (IBNR) to increase the confidence level of provisions. The cost of strengthening provisions was comfortably absorbed by profit margins in other non-life lines of business,” the rating agency continues.