March 2015/4

With 2014 now behind us, The Insurance Insider takes a look at the possible outcomes in the upcoming first quarter results season...

Amid limited growth opportunities (re)insurers handed back more capital in 2014 in a bid to create shareholder value and boost returns, as the wheels of M&A were finally set in motion.

Global (re)insurers once again led the way on investment yields in full-year 2014, although returns remained subdued.

(Re)insurers in our listed P&C universe generally delivered lower returns in 2014 as thinning underwriting margins and anaemic investment returns hit profitability.

Although (re)insurers gained some respite from the lack of major cat losses last year, there was evidence of weakening underwriting performance as carriers faced a variety of other headwinds such as rising expenses and expanding accident year, ex-cat loss ratios.

The rate of premium growth decelerated for most of the companies in our P&C universe in 2014 as carriers faced fierce competition, softening reinsurance pricing and stagnant demand for risk transfer, forcing them to revise their growth strategies.

Risk carriers faced a challenging 2014 as they adapted to a new market paradigm, with the effects starting to become apparent in their results.

The pace of cat bond issuance has picked up as the end of the first quarter comes into sight, with a number of sponsors bringing out new deals in the past week.

Tokio Marine expanded its new Kizuna Re II cat bond from an initial target of 25bn yen ($207mn) to 35bn yen ($290mn), as the ultra low-risk deal was oversubscribed by insurance-linked securities (ILS) investors, sister publication Trading Risk reported.

Private reinsurers appear unlikely to directly benefit from Heritage P&C's decision to reduce the coverage it buys from the Florida cat fund, with the majority of limit largely replaced by a new cat bond instead.

Tropical Cyclone Nathan is expected to strengthen to a severe Category 3 storm before making its third landfall in northern Australia early this week, according to the Australian Bureau of Meteorology.

QBE Europe has continued to expand its presence in the UK solicitors' professional indemnity (PI) market, increasing its share by almost 10 percent at the latest renewal.