Global reinsurance environment grows 13% YoY in H1 – Gallagher Re

This was attributed to strong investment activity and good underwriting results.

In the first half of 2023, the global reinsurance dedicated capital reached a total of $709b, representing a notable 13% increase compared to the revised figures for the full year 2022. This surge can be attributed to robust investment performance and steadily improving underwriting results.

According to Gallagher Re’s recent release of the Reinsurance Market Report for half-year 2023, capital adequacy of the global reinsurance industry remained strong and demonstrated overall improvement compared to the metrics from the full year 2022.

The reported combined ratio improved to 87.6%, a favourable change from the 89.2% recorded in the first half of 2022. 

Moreover, the underlying combined ratio continued its positive trajectory, reaching 95.4% compared to 97.7% in the first half of 2022. 

Of particular note, this underlying combined ratio represents the most impressive underwriting performance achieved in the ten years of analysis conducted by Gallagher Re.

ALSO READ: InsurTech funding down 34% in Q2: Gallagher Re

The underlying return on equity (ROE) experienced a significant increase, reaching 13.4%. 

This marked a substantial improvement over the 10.2% recorded in the first half of 2022. This boost in ROE was driven by enhanced underlying underwriting margins and increased income from investments.

Furthermore, the reported ROE displayed even more remarkable growth, surging to 19.3% compared to 4.4% in the first half of 2022. This improvement was additionally fueled by gains in investments.

It's worth noting that for the second consecutive year, the underlying ROE has exceeded the cost of capital, indicating a positive trend following a prolonged period of subpar returns.

The combination of higher interest rates and rate increases booked during renewals year-to-date presents a favorable tailwind for reinsurers, offering the potential for further enhancements to their return on equity (ROE).