Life reinsurance provides competitive advantage for major European insurers – Fitch

Written by Adam Cadle

17/02/2020

Four global reinsurers, Munich Re, Swiss Re, Hannver Re and SCOR, benefit from a competitive advantage by being leading players in life and health insurance, Fitch Ratings has said.

The insurers have the advantage of “earnings and capital diversification” which Fitch considers “credit-positive” for the groups.

“The life and health reinsurance market is characterised by an oligopolistic market structure with high barriers to entry. As a consequence, pricing is less important than in property & casualty reinsurance, while underwriting capabilities, product innovation and distribution strength are key differentiating factors,” Fitch stated.

Fitch expects life and health reinsurance market to grow 4% per annum on average over the next two-to-three years, mostly driven by emerging Asia and financial solutions that go beyond a pure risk transfer.

While returns on equity (ROEs) have remained broadly stable in the 8%-10% range over the last five years, Fitch expects mild pressure on life and health reinsurance ROEs for the next one-to-two years unless investment yields rise.

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