Some of the pressures the re/insurance sector faced in 2016—low interest rates, uncertainties around Brexit and a soft market—are likely to persist in 2017. But some additional drivers are set to affect the performance of the sector, as described by executives from major players such as Markel, Swiss Re and Willis Re.
Robert DeRose, senior director, AM Best
Reinsurers need to stay relevant through the continued low interest rate environment and pressure from alternative market providers. AM Best is projecting a return on equity (ROE) in the 7 to 9 percent range for 2017, which is fairly anaemic growth. This doesn’t drive financial strength in the way we’d like to see it. Of course, if there’s a major catastrophe event, that projection is off the table. It would take near perfect conditions to drive a double-digit ROE.
New growth approaches are taking on many forms. Reinsurers have seen their business mix shift in recent years. All are virtually in some other business niche(s) through organic growth or acquisition of specialty carriers. While these classes of business are not without their competitive pressures, this expansion, if tightly controlled, can bring diversifying risks to the balance sheet and help alleviate the pressures of tight reinsurance pricing.
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AM Best, North America, Argo Group, Barbican, Brit, UK, Europe, Risk, Brexit, EU, Solvency II, M&A, Technology, IT, Ed, Fitch, Markel, Pool Re, S&P