Capital market volatility dented reinsurers’ 2022 results – Aon

Aon has released its Reinsurance Aggregate report, revealing a major dent in 2022’s result, primarily caused by volatility in capital markets.

Recent renewals have highlighted reinsurers’ constrained underwriting appetites, particularly for loss-hit property catastrophe business.

However, reinsurers posted resilient underwriting results in 2022, despite the impact of Hurricane Ian, Aon reported.

Despite this, results were undercut on the investment side, where sharply rising interest rates and falling stock markets caused weak overall earnings and reductions in reported equity.

“Reinsurers’ underlying underwriting results were generally strong in 2022 despite the unusual amount of volatility in the capital markets,” said Mike Van Slooten, Aon’s head of business intelligence.

The aggregate looks at financial results from 19 reinsurers, representing more than 50% of global reinsurance premium, across property and casualty (P&C), life and non-life business, to produce a proxy for the sector as a whole.

Key takeaway’s from 2022’s data, included:

• · P&C gross premiums up 9% to hit $272bn.
• · Underwriting profit of $8.0bn for a net combined ratio of 96.2%.
• · Total investment return down 61% to $12.3bn.
• · Net income fell by 56 percent to $9.6 billion, representing a 5.2% return on equity
• · Total shareholders’ equity fell by 21% to $157bn at year’s end.

“Significant unrealised investment losses on bond portfolios weighed heavily on overall earnings and reported capital positions,” Van Slooten said.

“However, these losses are viewed as temporary and largely non-economic in nature. Looking ahead, renewal outcomes in 2023 and the tailwind of higher interest rates have improved the outlook for reinsurers and we expect new capital inflows to begin relieving current capacity constraints when earnings delivery is confirmed in reported results,” he added.

You can read Aon’s Reinsurance Aggregate report here.