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European reinsurers boost nine-month results despite cat burden: Fitch

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The four major European reinsurers reported strongly improved results in the first nine months of 2021, despite the heavy toll of catastrophe claims, according to analysis from Fitch.

The ratings agency said the improvement was mainly driven by significantly lower non-life pandemic claims, which was supported by strong premium growth and resilient investment incomes.

Net income return on equity for the four companies – Hannover Re, Munich Re, Swiss Re and Scor – improved by more than 5 percentage points on average in the first three quarters of 2021, compared with the same period last year.

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All four of the major reinsurers reported nat cat losses in excess of their nine-month budgets, with Q3 proving a standout quarter for claims due to the combined losses from Hurricane Ida and Storm Bernd.

“The increase in severity and frequency of nat cat claims driven by climate change will likely force reinsurers to enlarge their nat cat budgets or reduce their risk exposure,” the ratings agency noted.

Life and health earnings continued to be depressed by excess mortality linked to the pandemic, especially in the US and South Africa.

On average, pandemic claims accounted for 7% of net earned premiums in the first nine months, exceeding the level of 4.5% disclosed for 2020.

The ratings agency said capital adequacy for the reinsurers remained “very strong” and allowed for substantial premium growth.

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Fitch reiterated its “improving” outlook for the sector and said it expects financial performance will improve again in 2022, spurred on by higher prices in a hardening market and the ongoing resumption of economic activity.

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