Reinsurance rates continue to decline but reinsurers reported solid underwriting gains last year as catastrophe losses were significantly lower than average, according to a report published Tuesday by Fitch Ratings Ltd.
The group of 24 global property/casualty reinsurers that the rating agency tracks posted a reinsurance underwriting combined ratio of 85.5% in 2013, compared with 89.3% in 2012, according to the report.
Catastrophe losses in 2013 were, on the whole, manageable for reinsurance companies, according to the report.
The largest insured losses in 2013 were hailstorms in Germany in July that caused claims of $3.7 billion; floods in Central and Eastern Europe in June that resulted in insured losses of about $3.0 billion; storms and tornadoes in the United States in May and March that resulted in insured losses of about $1.8 billion and $1.6 billion, respectively; and floods in Canada in June that caused insured losses of about $1.6 billion, according to the report.
The total of insured natural catastrophe losses for 2013 was $31 billion, Fitch said, down from $65 billion in 2012 and below the 10-year average of $56 billion.
In addition, property/casualty reinsurers continue to report favorable reserve development, according to the report, but the surplus held in the sector remains adequate despite reserve releases.
“Several individual reinsurance product lines continued to experience unfavorable development in 2013, primarily longer-tail casualty and liability lines,” the report stated. “However, overall favorable development boosted underwriting performance, representing approximately 6.1% of earned premiums in 2013 compared with 6.5% in 2012.”
Fitch said it has a negative outlook on the global reinsurance sector, in part because of weakening caused by large rate reductions and widening of terms and conditions.
The report said the rating agency does not expect those market conditions to change greatly in the short term because of the “continuing competitive reinsurance market environment.”