Global Reinsurers’ Capital Levels Drop by 11% During H1, Hit by Declines in Markets

Global reinsurers’ capital levels dropped by 11% in the first half of 2022 to $647 billion, hurt by market declines, though higher interest rates helped their liability positions, broker Gallagher Re said on Tuesday.

Reinsurers, who insure the insurers, have suffered from recent drops in stock and bond markets, Gallagher Re said in a report.

Reported return-on-equity fell to 0.4% from 13.9% a year earlier. But while higher interest rates have hit reinsurers’ assets, they have made it easier for them to meet liabilities, as they need to set aside less money now to pay future claims.

This has led to healthy solvency levels, a key marker for regulators and ratings agencies.

“Why did capital go down by 11%? It’s all about the investment market, but this headline number really overstates what happened on a more economic basis,” Gallagher Re’s head of strategic and financial analysis, Brian Shea, told Reuters.

Reinsurers’ premiums grew by 14% from a year earlier, helped by higher premium rates, the report said.

Reinsurers are due to attend an annual conference next week in Monte Carlo, where they will discuss contracts for next year with their insurance clients. The conference is taking place there for the first time since 2019, following an interruption due to the COVID-19 pandemic.

(Reporting by Carolyn Cohn; editing by Bernadette Baum)