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Best’s News & Research Service - September 09, 2022 08:30 AM (EDT)

Best’s Market Segment Report: Life/Annuity and Health Reinsurers Remain Well Capitalized Despite Elevated Mortality

  • September 09, 2022 08:30 AM (EDT)

Oldwick //BestWire// - Companies within the global life/annuity and health reinsurance segments are adopting different approaches as they react to elevated mortality trends that have negatively impacted earnings. However, according to a new AM Best report, these reinsurers have remained well capitalized throughout the pandemic.

The new Best’s Market Segment Report, “Life/Annuity & Health Reinsurers Remain Well Capitalized as They Face Elevated Mortality,” is part of AM Best’s month-long look at the global reinsurance industry ahead of Rendez-Vous de Septembre in Monte Carlo. According to this report, life and health reinsurers’ earnings in 2021 suffered from adverse mortality trends, although the overall impact on the profits of the life and health segments varies. Offsets coming from earnings from other books of business, such as longevity, health and financial solutions have played a role, but with the pandemic continuing in 2022, return metrics are likely to continue to suffer negative impacts.

“Whether the pandemic will cause a permanent shift in mortality, or mortality will revert to pre-COVID-19 levels once the pandemic has finally dissipated, remains to be seen,” said Michael Porcelli, senior director, AM Best. “Early evidence indicates differing approaches to insurers’ mortality assumptions, with some choosing to update assumptions and pricing for the pandemic experience while others have not.”

In the United States, the impact on mortality pricing to date has been minimal, suggesting mortality is expected to return to normal. In the United Kingdom, there has been a greater expectation of a permanent shift in mortality. In particular, this is being felt in the longevity market and has led to more price competition.

Historically low cession rates have pressured the U.S. traditional life reinsurance market for many years. However, a notable rise in U.S. business ceded in more-recent years continued in 2021, with a 28% year-over-year increase. Drivers of this trend include the introduction of principle-based reserving, the 2017 CSO mortality table and the growing use of automated underwriting, which entails the use of more sophisticated data analytics.

The demand for health reinsurance solutions also has grown significantly. Primary carriers face the growing pressure of high-cost claims that come with innovative treatments and new therapies. In addition, fast expansion of health premium, combined with relatively narrow margins, creates capital pressure.

“COVID-19 somewhat slowed down the rate of global health premium expansion, but also enhanced the awareness of the value of health protection products, which is expected to fuel near-term growth,” said Doniella Pliss, director, AM Best. “Reinsurance provides a solution for capital relief and allows primary carriers to focus on further growth.”

To access the full copy of this market segment report, which includes additional sub-rankings for life and non-life reinsurers, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323761 .

A short video interview about this report also can be viewed at http://www.ambest.com/v.asp?v=ambrsglobalrelh922 .

Additional reports, including AM Best’s annual ranking of the Top 50 global reinsurance groups, as well as in-depth looks at the insurance-linked securities, Lloyd’s and regional reinsurance markets, were made available previously in the lead-up to Rendez-Vous de Septembre. Please visit Best’s Research for additional reinsurance-related reports.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on 11 September at 10:15 a.m. (CEST), at the Hermitage Hotel in Monte Carlo. For more information, please visit http://www.ambest.com/conferences/rmbrvs2022/index.html .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.



Health Reinsurance Life Reinsurance Reinsurance Rendez Vous De Septembre Reinsurers Press Release A.M. Best Rating Services, Inc. Insurance


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