AM Best has maintained its market segment outlook for the global reinsurance segment at positive, citing robust underwriting returns and the potential for solid full-year 2024 results despite an active Atlantic hurricane season.

The newly issued Best’s Market Segment Report also notes that life insurance remains a good source of diversification for the large global reinsurers. The global life/annuity and health reinsurance segments remain well-capitalized and positioned for robust growth. Claims stemming from elevated mortality have been manageable, and more recently have leveled off, but pinpointing direct causes and future directions has been difficult.

According to AM Best, property reinsurance rates and terms have been relatively stable and are unlikely to soften in the coming months, owing to the hurricane activity during this year. Demand for coverage also remains strong, and possibly even growing, due to heightened natural catastrophe loss activity and general economic and political uncertainty.

“Reinsurers’ underwriting margins have improved steadily since 2021, with substantial improvement to rates and terms following the market dislocation in 2023,” said Carlos Wong-Fupuy, senior director, AM Best. “In 2023, the global reinsurance segment generated one of its best years in recent history, with several large reinsurers reporting combined ratios below 90.0 and returns on equity exceeding 20%.”

Higher interest rate yields are also beginning to earn out, increasing investment income and bolstering total returns. However, concerns remain about adverse development in the U.S. casualty segment, with many reinsurers re-evaluating their positions for 2025 renewals.

The U.S. hurricane season was expected to be an active one and generated significant losses between hurricanes Helene and Milton. While the frequency and magnitude of the 2024 hurricane events were above average, the report notes a fortunate development as many of the events’ paths altered right before landfall, redirecting them to less populated areas.

“Reinsurers expect to bear some losses from Helene and Milton,” said Dan Hofmeister, associate director, AM Best. “We expect the two will have an impact on third- and fourth-quarter earnings, but reinsurers should generally still report profitable full-year results for 2024.”

AM Best’s positive outlook for the global reinsurance segment has been driven largely by the tailwind in property reinsurance, with the only major headwind being some uncertainty about casualty business—specifically, rising concerns about U.S. casualty social inflation trends, and to some degree even globally. Despite generally strong operating results in 2023, several reinsurers reported adverse casualty reserve development at year-end. As a result, reinsurers will likely become more selective with their casualty books, which may result in more hardening.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=348858.

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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