The report provides in-depth analysis of the size and performance of the reinsurance industry, based on the Gallagher Reinsurance Index group of companies.
Key finds from this report:
- Global reinsurance dedicated capital totalled USD 638bn at full-year 2022. This is down 12% from the restated 2021 base, driven by a decline in the value of investments.
- This US GAAP / IFRS accounting view, however, masks that in economic terms solvency remained strong and in fact generally increased during the year.
- Gallagher Re’s in-depth analysis of a subset of 16 reinsurers shows the reported combined ratio was broadly stable at a healthy 97.8%. On an underlying basis, the combined ratio improved for the third year in a row, from 99.7% to 98.8%.
- While the reported ROE declined from 11.4% to 6.8% due to a swing in investment gains (a strong tailwind in 2021, a strong headwind in 2022), underlying results improved.
- The underlying ROE jumped from 6.3% to 11.2%. This large swing has been driven by better underwriting results, stronger running investment income and, for 2022, more operating leverage (ie a smaller denominator of shareholders’ equity).
- Perhaps most notably, for the first time in the past ten years, we calculate an underlying ROE that surpasses reinsurers’ weighted average cost of capital (WACC).