Printed from

Global dedicated reinsurance capital declines

Posted On: Sep. 6, 2022 2:07 PM CST


Global dedicated reinsurance capital fell by 11% to $647 billion in the first half of this year, driven by significant unrealized investment losses, even as premium growth remained strong,  according to a report released Tuesday by Gallagher Re, the reinsurance business of Arthur J. Gallagher & Co.

Capacity tightened relative to demand, but not as significantly as the decline in capital suggests, and the reinsurance industry’s underlying profitability improved, Gallagher Re said in the report.

Reinsurers’ premiums grew 14% during the first half, buoyed by ongoing price increases, and their reported combined ratio was 93.0% versus 94.1% in the first half of 2021, Gallagher Re said in its analysis of a subset of 17 reinsurers.

However, the accident year loss ratio, excluding natural catastrophe losses and reserve developments, deteriorated slightly to 60.2% from 59.8% in the year-earlier period as rate hikes failed to keep pace with increased loss costs, according to the report.

While still below 100%, the underlying combined ratio deteriorated to 99.7%, versus 98.4% on June 30, 2021, due to a higher load of normalized natural catastrophe losses, Gallagher Re said.

Investment losses also hit reinsurers’ reported return on equity during the first half, which fell to 0.4%, but the sector’s underlying ROE improved to 7.5%, up from 6.3% in the first half of 2021.

This still stands below the industry’s cost of capital but is the best underlying ROE measured since 2014, Gallagher Re said.

“Investment losses have hurt what was otherwise a more positive first half for reinsurers, and the steep headline decline in capital overstates the impact on economic capital positions,” James Kent, global CEO of Gallagher Re, said in a statement.