War, Weather, and Coronavirus Create Headwinds for Reinsurers Following Strong 2021 Results

DBRS Morningstar released a commentary titled “War, Weather, and Coronavirus Create Headwinds for Reinsurers Following Strong 2021 Results” that discusses the 2021 results for a selection of major global property and casualty (P&C) reinsurance providers. Results shows that reinsurance companies performed significantly better compared with 2020 despite higher catastrophe losses. However, the Russia-Ukraine conflict, climate-related losses, and legacy coronavirus issues weigh on the outlook for 2022. The market volatility resulting from the ongoing conflict in Ukraine is already affecting equity market valuations of insurance companies.

The commentary highlights the following:
-- Global reinsurers experienced improved net earnings for 2021 as a result of stronger underwriting profitability and improved investment income compared with 2020.
-- An equity markets rebound is being threatened by ongoing conflict In Ukraine. Global markets now face a new challenge, caused by the Russian invasion of Ukraine in February 2022. The markets have been trending downward since the commencement of hostilities.
-- In DBRS Morningstar's view, the outlook for the P&C reinsurance market remains positive with renewal rates still trending upward and economic activity increasing globally. However, some headwinds still lie ahead, such as legacy litigation issues from the pandemic, climate change, and the effects of the invasion of Ukraine.

“The fallout from the Ukraine conflict may negatively impact investment performance through lower equity market valuations and lower bond market values as central banks act to curb higher inflation expectations,” says Victor Adesanya, Vice President, Insurance. “DBRS Morningstar's outlook for the P&C reinsurance market remains positive. We anticipate that the reinsurance industry will be able to maintain strong capitalization in the near future as some companies issue new equity and debt, while benefitting from an insurance market that continues to experience a favourable pricing environment.