Life reinsurance provides competitive advantage for major European insurers: Fitch

Global reinsurers Munich Re, Swiss Re, Hannover Re and SCOR benefit from a competitive advantage by being leading players in life and health reinsurance, says a new report by Fitch Ratings.

It noted that they benefit from earnings and capital diversification which Fitch considers credit-positive for those 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 expects life and health reinsurance market to grow 4 percent 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 percent 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.