Global reinsurance market reset to de-risk portfolios, realign carrier relationships, and improve pricing led to strong technical results in 2023, according to AM Best. The rating agency's latest report highlights reinsurers' shift towards capital protection over earnings stabilisation by tightening contracts, refining coverage scope, and moving away from high-frequency layers. AM Best predicts prolonged difficult pricing in reinsurance due to sustained high claims, driven by medium-sized losses and secondary perils rather than major catastrophes. The report also notes that the global reinsurance segment remains well capitalised with stable solvency, despite temporary unrealised investment losses on fixed-income instruments. Carlos Wong-Fupuy, senior director at AM Best, explains that the current severe cycle has not been characterised by capital depletion, adding: “Unlike previous severe cycles and despite the very attractive pricing environment, new company formations have not materialised, particularly in the property catastrophe space. “Disappointing results during the previous, prolonged soft market deterred potential new investors.” Following the market dislocation during the January 2023 renewals after the uncertainty caused by Hurricane Ian in late 2022, the agency observes an unequivocal change, confirming the current hard market conditions. According to AM Best, despite challenges from the adoption of IFRS 17 accounting standards, the global reinsurance segment continues to expand with a strong return on equity and profit margins, effectively mitigating concerns over adverse reserve development on certain legacy books of business, in particular US casualty.
