Reinsurers’ return on equity jumped to 22% last year – AM Best

Written by Michael Griffiths

31/10/2024

Reinsurance companies posted a return on equity (ROE) of 22% in 2023, the highest level in five years, according to new figures from AM Best.

This was driven mainly by a turnaround in unrealised losses from the previous year as well as a strong underwriting performance around the globe.

For 2024, AM Best suggested that a “significant proportion” of insured losses stemming from hurricanes Milton and Helene are likely to be transferred to the global reinsurance market.

However, stricter reinsurance terms and conditions, which led to higher attachment points, should also help make losses for reinsurers around the globe more manageable.

AM Best said it is also expecting reinsurer ROEs to continue to “exceed the cost of capital over the medium-term”, as new capital seeks enterprises with established track records or with the liquidity of the insurance-linked securities market.

“Fourth-quarter 2024 reinsurers’ results will be negatively affected, but full-year earnings should still be favourable,” said senior financial analyst at AM Best, Guilherme Monteiro Simoes.

“Further reinsurance market hardening is unlikely, but Helene and Milton will probably stall any softening of the market cycle.”

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