14th September 2023
Litmus’ mid-year Reinsurance Renewal Roundup highlights diverging outcomes for the big 4
- Continued price firming evident across the market year-to-date
- Diverging outcomes for the big four reinsurers at 1 July
An examination of the P&C treaty renewals of the big four European reinsurance groups
Lewis Phillips
Consultant Analyst
- With around 40% of global P&C reinsurance premiums, the four major European reinsurance groups are a bellwether for the market.
- The four companies renewed EUR 12bn of P&C treaty gross premiums at mid-year 2023 compared with EUR 13bn at mid-year 2022.
- Headline premium volume was virtually flat at mid-year 2023 for the aggregate of the four companies.
- Growth in renewed premiums at Hannover Re and SCOR was offset by reductions at Munich Re and Swiss Re.
- Swiss Re and Munich Re reduced premiums in Casualty.
- Premium rate increases slowed through the year, with mid-year price rises ranging from 4.8% at Hannover Re to 9.0% for SCOR.
- Pronounced price increases in Natural Catastrophe.
All references to premiums refer to gross premiums written.
Market bellwether
The big four European reinsurance groups (Hannover Re, Munich Re, SCOR and Swiss Re) account for some 40% of global P&C reinsurance premiums, according to data from A.M. Best. As such, they represent a bellwether for the market as a whole.
The four companies provide commentary on the mid-year renewals with their half year financial results. In this brief report, we examine their public disclosures, and have aggregated the four to present a composite picture.
North America and Asia dominate
Mid-year reinsurance renewals are dominated by business from North America and Asia Pacific (notably Australia) and Natural Catastrophe is an important feature of this renewal period. Available disclosures indicate that some 80% of treaty renewals have been completed by this time of the year.
Diverging volumes
While continued firming market conditions were evident at mid-year, Munich Re and Swiss Re, took a cautious approach, with renewed premium volumes declining by 2% and 8%, respectively. Munich Re principally attributed the decline in its renewed book to selective growth and portfolio optimisation, which included a reduction in Casualty proportional premiums on treaties where pricing, terms and conditions were inadequate. Swiss Re pointed to targeted reductions in Casualty business in the Americas. SCOR and Hannover Re also pointed to disciplined underwriting while taking advantage of favourable opportunities to grow their books at the mid-year renewal. SCOR reported a 7% increase in renewed premium volume overall, with growth in all regions other than APAC (13% of its renewed book with premium volume down 9%). Hannover Re reported an overall increase of 13% with 3% attributed to new and restructured business and 10% to price and volume increases. Its premium growth was tempered by share reductions on some underperforming treaties in Asia.
All of the four companies pointed to continuing favourable price momentum and better terms on renewed business.
Chart 1.
Sources: Company disclosures, Litmus Analysis.
Swiss Re reports in US dollars; for the purpose of this aggregation, its figures have been translated into euros using the prevailing exchange rate for the period.
Aggregate premium volume flat with average pricing up 5.2%
In aggregate, the four companies renewed some EUR 12bn of gross treaty premiums at mid-year 2023, with growth of just 0.4% and an average risk-adjusted price increase of 5.2%. This compares to growth of 5% and an average price increase of 5.8% achieved at mid-year 2022.
The change in renewed premium volume at mid-year 2023 ranged from a reduction of 8% for Swiss Re to growth of 13% reported by Hannover Re.
All companies achieved higher average risk-adjusted premium rates, ranging from 4.8% at Hannover Re to 9.0% for SCOR. Swiss Re reported a 21% average price increase, partly offset by 16% higher loss assumptions, giving a net price increase of 5%. Munich Re’s average risk-adjusted pricing was up 5.1%. Further price hardening for natural catastrophe business was noted by Munich Re, SCOR and Swiss Re as a driver of premium growth in this line.
Premium growth slows at mid-year renewal
Compared with 1 April renewals, growth in renewed premium volume slowed at mid-year 2023 for the aggregated group as a whole and for all the constituent companies other than Hannover Re. For the group as a whole and for each company other than SCOR, growth at this renewal lagged that at mid-year 2022.
Chart 2.
Casualty lines temper growth at mid-year renewal
Chart 3 below shows the outcome, in terms of premium growth, for each company and the aggregate of the four at each of the major renewal periods over the last four years. At mid-year 2023, aggregate growth in renewed premiums for the group was constrained to 0.4%, as contractions in renewed premium volume by Swiss Re and Munich Re largely offset the increases achieved by SCOR and Hannover Re. Munich Re reported a 10% reduction in proportional casualty business at the July renewal. From the information disclosed, Litmus Analysis calculates that Swiss Re’s renewed premium volume in Casualty declined by some 25% at the mid-year renewal.
Chart 3.
Price increases slowing to 1 July 2023
Aggregate premium rate increases slowed through 2023 to date, while the picture for the individual companies was more nuanced, with Munich Re and Swiss Re reporting higher increases at 1 April before dropping back at 1 July. SCOR bucked the trend, reporting a stronger average price rise at mid-year than at 1 April. For much of the last four years Munich Re’s reported price increases have been lower than those reported by the other companies, although this may be influenced by differences in the way this measure is calculated and reported by each company.
Chart 4.
SCOR achieved a stronger price rise at 1 July 2023
Looking again at the individual results over the year to date, average premium rate increases have shown a broadly upward trend, with an aggregate 8.3% achieved at 1 January, 6.1% at 1 April and 5.2% at 1 July. SCOR bucked the trend, reporting stronger price rises at 1 July (9%) than at 1 April (7%).
Chart 5.
Some caution is necessary in looking at these trends which are influenced both by underlying price movements and variations in the business mix at the different periods.
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Litmus Analysis specialises in helping the re/insurance industry understand credit risk, the ratings agencies, and the financial analysis of (re)insurers. Its main areas of work are Ratings Advisory (helping companies manage their communications with the rating agencies), cedant analysis, (re)insurer selection and stress testing, market analysis, peer reviews & benchmarking and market security/counterparty credit risk management (including via the InsurTech application LitmusQ).
The Litmus team of consultant analysts all have a senior rating agency and/or broker market security background and includes the former heads of S&P Ratings Europe (insurance), A.M. Best EMEA and A.M. Best Asia Pacific.
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