2017 Reinsurance Market Briefing - Zurich
FIFA Museum AG
7 June 2017
2017 Reinsurance Market Briefing - Zurich
Reinsurance Market Briefing - Zurich 7 June 2017 2
Welcome
Nick Charteris-Black Managing Director, Market Development – EMEA
Agenda
Reinsurance Market Briefing - Zurich 7 June 2017 3
10:10 Keynote Speech: ILS Market Update & Developments
Niklaus Hilti, CEO of Credit Suisse Insurance Linked Securities Ltd
10:50 Thematic Session:
Global Reinsurance Outlook Greg Reisner, Director
11:20
11:40 Methodology Update Presentation: An Update on A.M. Best's Credit Rating Methodology (BCRM) for (Re)Insurance Companies & Best's Capital Adequacy Ratio (BCAR) Model
Greg Carter, Managing Director, Analytics – EMEA Mathilde Jakobsen, Director, Analytics
12:20 Reinsurance Buying Trends: Analysis of Reinsurance Purchasing Trends Within Europe's Major Cedant Groups & Leading National Insurers
Catherine Thomas, Senior Director, Analytics
13:00
Disclaimer
Reinsurance Market Briefing - Zurich 7 June 2017 4
© AM Best Company (AMB) and/or its licensors and affiliates. All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT AMB’s PRIOR WRITTEN CONSENT. All information contained herein is obtained by AMB from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall AMB have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of AMB or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if AMB is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address the suitability of any particular financial obligation for a specific purpose or purchaser. Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. Credit ratings do not address any other risk, including but not limited to, liquidity risk, market value risk or price volatility of rated securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY AMB IN ANY FORM OR MANNER WHATSOEVER. Each credit rating or other opinion must be weighed solely as one factor in any investment or purchasing decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security or other financial obligation and of each issuer and guarantor of, and each provider of credit support for, each security or other financial obligation that it may consider purchasing, holding or selling.
Disclaimer
Reinsurance Market Briefing - Zurich 7 June 2017 5
US Securities Laws explicitly prohibit the issuance or maintenance of a credit rating where a person involved in the sales or marketing of a product or service of the CRA also participates in determining or monitoring the credit rating, or developing or approving procedures or methodologies used for determining the credit rating.
No part of this presentation amounts to sales / marketing activity and A.M. Best’s Rating Division employees are prohibited from participating in commercial discussions.
Any queries of a commercial nature should be directed to A.M. Best’s Market Development function.
2017 Reinsurance Market Briefing - Zurich
Reinsurance Market Briefing - Zurich 7 June 2017 6
Thematic Session: Global Reinsurance Outlook
Greg Reisner Director
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 7
Market is still largely influenced by global leaders
M&A will continue
Alternative capacity is
driving change
Alternative capital is driving a great deal of structural change in the market.
However, the market continues to be heavily influenced by the global reinsurance leaders.
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 8
292 320 340 332 345
19 48
60 68 75
0
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016E
ConvergenceCapacity
TraditionalCapacity
Total Dedicated Reinsurance Capacity (USD billions)
Note: * Estimate by Guy Carpenter and A.M. Best Source: A.M. Best, Guy Carpenter
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 9
4.0 3.0 4.0 4.5 25.0 34.0 41.0 48.5 19.0
23.0 23.0
22.0
01020304050607080
2013 2014 2015 2016E
US
D ($
Bill
ions
)
Alternative Capacity by Market Segment
ILW Collateralized Re Catastrophe BondsForecast by Guy Carpenter and A.M. Best
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 10
60%
65%
70%
75%
80%
85%
$0
$50
$100
$150
$200
$250
2012 2013 2014 2015 2016E
Capacity Utilization
Capacity Depletion Needed To Trigger a Hard Market Capacity Utilization
USD
Bill
ions
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 11
Vast majority of collateralized reinsurance is influenced by the Top 5 players
(USD billions)
$9.3 • Nephila Capital
$7.4 • Credit Suisse Ins Linked Strategy
$6.5 • LGT ILS Partners
$5.1 • Stone Ridge Asset Management
$4.8 • Fermat Capital Management Source: Artemis
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 12
Client Agent & Broker
Primary Insurance Company
Reinsurance Broker
Reinsurance Company
Convergence Capital
The market will continue to become more efficient as all
players strive to become closer to
the client.
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 13
Strategy Evolution
Traditional Dual Platform
Control the client
Build primary business
Alternative Capital
Platform
Manage or have a relationship
with alternative capital
Build fee income stream
M&A
Relevance and size
Ability to be small and nimble
with parental protection
P/C Reinsurance
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77.3% 60.2% 56.0% 56.2% 56.2% 60.6% 57.8%
31.5%
31.6% 31.9% 33.5% 34.8% 34.7% 33.3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0%
20%
40%
60%
80%
100%
120%
2011 2012 2013 2014 2015 2016 5yr Avg
Global Market Trends Loss Ratio Expense Ratio Loss Reserve Development
P/C Reinsurance
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107%
91% 89% 92% 92% 96%
112%
93% 87% 87% 91% 92%
108%
91% 87% 88% 90%
98%
0%
20%
40%
60%
80%
100%
120%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
European "Big Four" U.S. & Bermuda Lloyd's
Combined Ratios by Reinsurance Sector Loss Ratio Expense Ratio
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 16
1.9%
12.4% 13.1%
11.6%
9.5% 8.2%
0%
2%
4%
6%
8%
10%
12%
14%
2011 2012 2013 2014 2015 2016
Global Market Trends ROE 5yr Avg
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 17
6.6%
-0.9% -2.8%
13.0%
10.6%
15.1% 13.1%
11.6%
16.2%
11.0% 10.9%
14.7%
11.5%
7.5% 8.9%
9.7%
6.8% 8.1%
-5%
0%
5%
10%
15%
20%
European "Big Four" U.S. & Bermuda Lloyd's
Return on Equity by Reinsurance Sector
2011 2012 2013 2014 2015 2016
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 18
13.8% 15.0%
10.0%
13.3% 12.4% 12.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2011 2012 2013 2014 2015 2016
Global Market Trends Operating Cash Flow as a % of Equity
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 19
18.4%
9.8% 11.9%
19.2%
10.9%
13.2% 11.4% 10.6%
5.4%
17.9%
11.4%
6.0%
17.1%
9.7%
7.2%
15.4%
9.9% 10.9%
0%
5%
10%
15%
20%
25%
European "Big Four" U.S. & Bermuda Lloyd's
Operating Cash Flow as a Percentage of Equity by Reinsurance Sector
2011 2012 2013 2014 2015 2016 Q4
P/C Reinsurance
Reinsurance Market Briefing - Zurich 7 June 2017 20
Composite includes Greenlight Re, Third Point Re, Watford Re, Hamilton Re.
Hedge Fund Reinsurance Strategies 5-Yr Avg 2016 2015 2014 2013 2012 2011 NPW (P&C only) 1.2 1.8 1.9 1.3 0.5 0.5 0.4 Net Earned Premiums (P&C only) 1.0 1.5 1.7 1.0 0.5 0.5 0.4 Net Investment Income 0.3 0.4 0.2 0.7 0.2 0.1 0.0 Realized Investment Gains / (Losses) - - - - - - - Total Revenue 1.3 1.9 1.8 1.6 0.8 0.5 0.4
Net Income 0.1 0.1 (0.3) 0.3 0.3 0.0 0.0 Shareholders' Equity (End of Period) 3.8 6.1 6.0 5.0 1.1 0.8 0.8 Loss Ratio 67.9% 69.1% 66.0% 64.1% 61.8% 78.5% 63.6% Expense Ratio 37.8% 42.0% 36.4% 40.8% 35.3% 34.3% 40.2% Combined Ratio 105.7% 111.2% 102.4% 104.9% 97.1% 112.9% 103.8% Reserve Development - (Favorable)/Unfavorable 3.4% 2.9% 1.8% 0.8% -0.7% 12.2% 6.9% Net Investment Ratio1 31.9% 27.3% 10.4% 65.3% 39.8% 16.9% 6.1% Operating Ratio 73.7% 83.9% 92.0% 39.6% 57.3% 96.0% 97.7% Return on Equity 6.5% 1.5% -4.8% 6.6% 27.3% 1.8% 0.8% Return on Revenue 8.9% 4.6% -15.8% 19.5% 33.4% 2.7% 1.7% NPW (P&C only) to Equity (End of Period) 39% 30% 33% 25% 51% 55% 44% Net Reserves to Equity (End of Period) 23% 20% 20% 8% 30% 39% 26% Gross Reserves to Equity (End of Period) 27% 22% 22% 15% 31% 43% 30%
Segment Outlook – Reinsurance
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Headwinds Tailwinds Intense competition Cession rates increasing Ongoing interest from third party capital Solid calendar year underwriting results
Earnings under pressure Favorable reserve development Pressure on terms and conditions Strong risk-adjusted capital
Potential for increased inflation Increase in interest rates M&A
Although performance and capitalization remain strong, pressure on margins continues to mount. Over the intermediate term, returns for some reinsurers will
fall short on a risk-adjusted basis. Maintain negative outlook.
Reinsurance Market Briefing - Zurich 7 June 2017 22
Q&A Greg Reisner
Director
2017 Reinsurance Market Briefing - Zurich
Reinsurance Market Briefing - Zurich 7 June 2017 23
Methodology Update Presentation: An Update on A.M. Best's Credit Rating Methodology
(BCRM) for (Re)Insurance Companies & Best's Capital Adequacy Ratio (BCAR) Model
Greg Carter Managing Director, Analytics - EMEA
Mathilde Jakobsen Director, Analytics
Agenda
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Update on proposed changes to Best Credit Rating Methodology (BCRM) Update on proposed changes to Best Capital Adequacy Ratio (BCAR) model
A.M. Best Rating Methodology – Key Rating Components
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Balance Sheet Strength
Operating Performance
Business Profile
Enterprise Risk Management
+ Country Risk
Rating
Insurance Company Financial Strength
Best's Credit Rating Methodology (BCRM)
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All information can be found at www.ambest.com
Best's Insurance-Linked Securities & Structures Methodology (BILSM)
Reinsurance Market Briefing - Zurich 7 June 2017 27
All information can be found at www.ambest.com
Methodology Update
Reinsurance Market Briefing - Zurich 7 June 2017
• Impetus for change
– Transparency and consistency
– Move towards best practices
– A way to integrate new tool: application of BCAR
• Methodology still subject to changes
• No fundamental change to rating analysis
28
Timeline
Reinsurance Market Briefing - Zurich 7 June 2017
29
Draft BCRM & PC BCAR
criteria released for comment
Comment period included public updates
as specific issues raised
Comment period extended to coincide with
release of all BCAR models
Comment period ends
Comments incorporated as necessary into BCRM and all BCAR criteria
BCRM and BCAR criteria is published and
becomes effective
10-MAR-2016
Q3/4 2017
1-MAR-2017
Building Block Approach
Reinsurance Market Briefing - Zurich 7 June 2017
• The building blocks themselves will remain the same • Components of the building blocks are currently reviewed
A.M. Best’s Rating Process
30
Stochastic-Based BCAR
Reinsurance Market Briefing - Zurich 7 June 2017
• Best’s Capital Adequacy Ratio (BCAR) – Comprehensive quantitative tool that evaluates many of the risks to the
balance sheet simultaneously – Generates an overall estimate of the required level of capital to support
those risks and compares it with available capital
• BCAR is a key tool in the assessment of balance sheet strength – Not the sole determinant of balance sheet strength – Not the sole determinant of the rating
31
Stochastic-Based BCAR
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• Not intended to change underlying view of the risks • Not intended to change the main risk categories of the models
Goals are to:
− Apply stochastic-based risk factors within the model, with factors generated using stochastic simulations from probability curves and ESG
− Incorporate company-specific detailed data from A.M. Best’s Supplemental Rating Questionnaire and financial statements
Stochastic-Based BCAR
Reinsurance Market Briefing - Zurich 7 June 2017
• New Metric – VaR (Value at Risk)
33
VaR does not tell us about what’s in the tail so we need to look at more than one VaR
Stochastic-Based BCAR
Reinsurance Market Briefing - Zurich 7 June 2017
• Using Value at Risk (VaR) metric – VaR levels: 95, 99, 99.5, 99.6 – VaR 99.8 also modelled but not included in balance sheet assessment
34
Return Period (Years)
Annual Probability (%)
ConfidenceLevel (%)
20 5.0 95.0100 1.0 99.0200 0.5 99.5250 0.4 99.6
Stochastic-Based BCAR
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• The BCAR formula itself is changing
BCAR = ( Available Capital - Net Required Capital) x 100Available Capital
Stochastic-Based BCAR
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Available Capital (AC) Reported Capital (PHS) Equity Adjustments:
Unearned Premiums (DAC) Assets Loss Reserves Reinsurance Equalization/Contingency Reserves
Debt Adjustments: Subordinated Debt Debt Service Requirements
Other Adjustments: Goodwill & Intangible Assets Other
Net Required Capital Gross Required Capital (GRC): (B1) Fixed Income Securities (B2) Equity Securities (B3) Interest Rate (B4) Credit (B5) Loss and LAE Reserves (B6) Net Premiums Written (B7) Business Risk (B8) Potential Catastrophe Loss
Covariance Adjustment
Net Required Capital (NRC)*
BCAR Ratio = (Available Capital – Net Required Capital) / Available Capital x 100
*NRC= SQRT [ (B1)²+(B2)²+(B3)²+(0.5*B4)² +[(0.5*B4)+B5)]²+(B6)² + (B8)²] + B7
Stochastic-Based BCAR
Reinsurance Market Briefing - Zurich 7 June 2017 37
• Catastrophe risk as a separate NRC component (B8) – Net PMLs (pre-tax)
• All perils combined per occurrence – Included in covariance adjustment
• More diversification benefit (usually) so lower NRC
Net Required Capital = + (B7)(B1)2 + (B2)2 + (B3)2 + (.5 * B4)2 + [(.5 * B4) + (B5)]2 + (B6)2 + (B8)2
Stochastic-Based BCAR
Reinsurance Market Briefing - Zurich 7 June 2017 38
Stochastic-Based BCAR
Reinsurance Market Briefing - Zurich 7 June 2017 39
• If a cat loss occurs, what would the BCAR scores look like? – Reduce Available Capital (Reported Surplus)
• 1-in-100 year pre-tax Net PML from per occurrence, total all perils • Including reinstatement premium
– Increase recoverables by 40% of ceded loss • From 1-in-100 year pre-tax PML from per occurrence, total all perils • Adjust credit risk factors if needed
– Increase net loss reserves by 40% of pre-tax net PML • From 1-in-100 year pre-tax PML from per occurrence, total all perils
– See magnitude of BCAR scores drop at all confidence levels
BCAR in the Rating Process
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• BCAR is the starting point assessment for balance sheet strength
BCAR in the Rating Process
Reinsurance Market Briefing - Zurich 7 June 2017 41
• BCAR is the starting point in the assessment of balance sheet strength
Balance Sheet Strength Assessment
Reinsurance Market Briefing - Zurich 7 June 2017
42
Holding Company Impact Assessment
Reinsurance Market Briefing - Zurich 7 June 2017
Country Risk Balance
Sheet Strength
Baseline
Rating Unit Balance Sheet
Strength Assessment
Consolidated BCAR Financial Leverage
Operating Leverage Coverage
Financial Flexibility/Liquidity Intangible Assets
Holding Company Impact
Assessment
43
Balance Sheet Strength Assessment
Reinsurance Market Briefing - Zurich 7 June 2017
Combined Balance Sheet Strength Assessment (Lead Rating Unit and Holding Company)
Holding Company
Lead
Rat
ing
Uni
t Positive Neutral Negative Very Negative
Strongest Strongest Strongest Very Strong Adequate Very Strong Strongest Very Strong Strong Weak
Strong Very Strong Strong Adequate Very Weak Adequate Strong Adequate Weak Very Weak
Weak Adequate Weak Very Weak Very Weak Very Weak Weak Very Weak Very Weak Very Weak
44
The Baseline Assessment
Reinsurance Market Briefing - Zurich 7 June 2017
Overall Balance Sheet Strength Assessment
Com
bine
d Ba
lanc
e Sh
eet A
sses
smen
t (R
atin
g U
nit /
Hol
ding
Com
pany
) Country Risk Tier CRT-1 CRT-2 CRT-3 CRT-4 CRT-5
Strongest a+/a a+/a a/a- a-/bbb+ bbb+/bbb
Very Strong a/a- a/a- a-/bbb+ bbb+/bbb bbb/bbb-
Strong a-/bbb+ a-/bbb+ bbb+/bbb/bbb- bbb/bbb-/bb+ bbb-/bb+/bb
Adequate bbb+/bbb/bbb- bbb+/bbb/bbb- bbb-/bb+/bb bb+/bb/bb- bb-/b+/b
Weak bb+/bb/bb- bb+/bb/bb- bb-/b+/b b+/b/b- b/b-/ccc+
Very Weak b+ and below b+ and below b- and below ccc+ and below ccc and below
45
Baseline Adjusted for Performance
Reinsurance Market Briefing - Zurich 7 June 2017
• Variety of quantitative and qualitative measures to evaluate operating performance • Using appropriate benchmark • Looking at level, trend and volatility
46
Operating Performance Rating Drivers
Underwriting performance Investment performance
Total operating earnings Prospective financial forecasts
Other considerations Unique to LOB, region of operation, structure
Operating Performance Assessment
Adjustment (Notches)
Very Strong +2
Strong +1
Adequate 0
Weak -1
Very Weak -2/3
Baseline Adjusted for Business Profile
Reinsurance Market Briefing - Zurich 7 June 2017
• The factors that influences our view of business profile have not materially changed • Eight main key rating factors qualitatively judged to be positive, neutral or negative • Other metrics may be included if deemed relevant by the analyst
47
Business Profile Rating Drivers
Product/Geographic Concentration
Product Risk
Market Position Degree of Competition
Pricing Sophistication & Data Quality
Management Quality
Regulatory, Event & Market Risks
Distribution Channels
Business Profile Assessment
Adjustment (Notches)
Very Favorable +2
Favorable +1
Neutral 0
Limited -1
Very Limited -2
Baseline Adjusted for Enterprise Risk Management (ERM)
Reinsurance Market Briefing - Zurich 7 June 2017
• Assessment of the overall risk management framework in place • Assessment of the rating unit’s risk profile relative to its risk management capabilities • Overall assessment of ERM
48
ERM Rating Drivers
Product and Underwriting Risk Investment Risk
Reserving risk Legislative/Regulatory/Judicial/
Economic Risk
Concentration Risk Operational Risk
Reinsurance Risk Liquidity and Capital
Management Risk
ERM Assessment Adjustment (Notches)
Very Strong +1
Adequate 0
Weak -1/2
Very Weak -3/4
Building Block Approach
Reinsurance Market Briefing - Zurich 7 June 2017
• The building blocks themselves will remain the same • Components of the building blocks are currently reviewed
A.M. Best’s Rating Process
49
Reinsurance Market Briefing - Zurich 7 June 2017 50
Q&A Greg Carter
Managing Director, Analytics - EMEA
Mathilde Jakobsen Director, Analytics
2017 Reinsurance Market Briefing - Zurich
Reinsurance Market Briefing - Zurich 7 June 2017 51
Catherine Thomas Senior Director, Analytics
Reinsurance Buying Trends: Analysis of Reinsurance Purchasing Trends
Within Europe's Major Cedant Groups & Leading National Insurers
Reinsurance Cessions: Trends in Europe
Reinsurance Market Briefing - Zurich 7 June 2017 52
-8.2% -4.3%
17.8%
3.0% 0.3% -0.7%
6.6%
2.6%
-10%
-5%
0%
5%
10%
15%
20%
2013 2014 2015 2016
Reinsuranceceded
GrossPremiumsWritten
Note: 2016 change excludes Covea
Annual Change (%) for Top 20 European Cedants
Reinsurance Cessions in Europe 2012 - 2014
Reinsurance Market Briefing - Zurich 7 June 2017 53
Cessions decreasing
Gross Premiums Written relatively stable
Retention ratios increasing
Optimisation of global reinsurance programmes
Group programmes, separate divisions and even new legal entities
Centralised enterprise risk management practices
Reinsurance Cessions in Europe 2014 - 2016
Reinsurance Market Briefing - Zurich 7 June 2017 54
Cessions increasing, most notably in 2015
Gross Premiums Written modest increase
Retention ratios decreasing
Opportunistic reinsurance purchasing – favourable terms
Maintaining client relationships without breaching profitability hurdles
Focus on capital efficiency
Supporting new lines of business
Notes: Ranked by 2016 premiums ceded. Source: Best's Statement File -- Global, A.M. Best data and research
Reinsurance Cessions: Trends in Europe
Reinsurance Market Briefing - Zurich 7 June 2017 55
Reinsurance Ceded (Non-Life) (EUR millions)
Gross Premiums Written (Non-Life) (EUR millions)
Company Name (Top 10) Country 2016 2015 2014 2016 2015 2014
Lloyd's of London United Kingdom 7,936 7,690 6,713 34,870 36,218 32,281
Zurich Insurance Group Switzerland 6,657 5,157 4,503 32,944 33,102 32,711
Chubb Switzerland 6,490 5,581 4,503 31,188 21,794 17,491
Allianz Germany 4,397 4,933 3,961 51,535 51,597 48,322
MAPFRE Spain 3,404 3,442 2,599 17,700 17,441 16,370
AXA France 3,346 3,224 2,907 35,900 34,931 32,872
Talanx Germany 2,931 2,885 2,500 19,096 18,883 16,438
Munich Reinsurance Company Germany 1,280 1,161 1,021 24,684 24,789 23,654
RSA Insurance Group United Kingdom 1,146 1,229 1,268 8,431 9,306 9,326
Admiral Group United Kingdom 1,032 963 824 1,731 1,628 1,408
Total (Top 20) 44,519 43,239 36,599 318,974 310,960 291,395
Retention ratios: Company-specific factors
Reinsurance Market Briefing - Zurich 7 June 2017 56
Retention Ratios (%)
Company Name 2016 2015 2014
Assicurazioni Generali 95 95 94 Munich Reinsurance Company 95 95 96 UnipolSai Assicurazioni 94 94 95 Aviva 93 84 93 Allianz 91 90 92 AXA 91 91 91 SCOR 90 89 90 Groupama 88 88 89 RSA Insurance Group 86 87 86 Talanx 85 85 85 Notes: Excludes Covea - 2016 data not available Source: Best's Statement File -- Global, A.M. Best data and research
Responding to Reinsurance Market Trends
Reinsurance Market Briefing - Zurich 7 June 2017 57
Dedicated reinsurance capacity continues to grow
Results helped by reserve releases and benign cat experience
Risk-adjusted capitalisation remains strong
But, margins and ROEs under pressure - reinsurance rate decreases unsustainable
A.M. Best outlook on the reinsurance sector negative
Reinsurance Cessions in Europe 2017 and beyond
Reinsurance Market Briefing - Zurich 7 June 2017 58
Reinforcing or broadening product range in commercial and specialty lines
National champions accommodating needs of corporate multinationals
New lines of business – technical and capital support
Potential impact of acquisitions
Capital Management / ERM
Reinsurance Market Briefing - Zurich 7 June 2017 59
Centralised ERM frameworks
Reduction in SCR volatility
Reinsurance as efficient capital support
Highly rated reinsurers remain well capitalised
Top Cedants: Germany
Reinsurance Market Briefing - Zurich 7 June 2017 60
Reinsurance Ceded (Non-Life) (EUR millions)
Gross Premiums Written (Non-Life) (EUR millions)
Company Name (Top 10) 2015 2014 2015 2014
Allianz SE 4,933 3,961 51,597 48,322
HDI Versicherung a.G. 3,065 2,718 13,633 11,934
Munich Reinsurance Company 1,161 1,021 24,789 23,654
Deutsche Rückversicherung AG 410 403 1,077 1,038
SV SparkassenVersicherung Holding AG 397 402 1,504 1,448
Gothaer Versicherungsbank VVaG 348 339 2,151 2,083
Provinzial Rheinland Holding Sparkassen 294 275 1,395 1,328
Provinzial NordWest Holding AG 255 267 1,827 1,787
Versicherungskammer Bayern Versicherungs 234 227 2,399 2,231
HUK-COBURG Haftpflicht-Unterstützungs 228 226 4,463 4,209
Total (Top 20) 12,774 11,292 121,896 114,224
Growth (Top 20) 13.1% 6.7%
Notes: For the full Top 20 listing, please see A.M. Best’s Briefing, “Natural Catastrophe Exposures Underpin Stable German Reinsurance Buying Trends” Source: Best's Statement File -- Global, A.M. Best data and research
Top Cedants: Germany
Reinsurance Market Briefing - Zurich 7 June 2017 61
Notes: For the full Top 20 listing, please see A.M. Best’s Briefing, “Natural Catastrophe Exposures Underpin Stable German Reinsurance Buying Trends” Source: Best's Statement File -- Global, A.M. Best data and research
Retention Ratios Company Name 2015 2014 Change R+V Versicherung AG 98.3% 98.3%
Munich Reinsurance Company 95.3% 95.7%
HUK-COBURG Haftpflicht-Unterstützungs 94.9% 94.6%
DEVK Deutsche Eisenbahn Versicherung Sach Huk 92.7% 91.6%
LVM Landwirtschaftlicher Versicherungs 92.3% 92.5%
VHV Vereinigte Hannoversche V. a.G. 91.6% 88.9%
Allianz SE 90.4% 91.8%
Versicherungskammer Bayern Versicherungs 90.3% 89.8%
Landschaftliche Brandkasse Hannover 86.1% 85.7%
Provinzial NordWest Holding AG 86.1% 85.0%
Top Cedants: France
Reinsurance Market Briefing - Zurich 7 June 2017 62
Reinsurance Ceded (Non-Life) (EUR millions)
Gross Premiums Written (Non-Life) (EUR millions)
Company Name (Top 10) 2015 2014 2015 2014
AXA S.A. 3,224 2,907 34,931 32,872
Société de Groupe d'Assurance Mutuelle Covéa 809 792 11,573 11,171
SCOR SE 641 518 5,723 4,935
Groupama S.A. 581 550 5,004 4,992
Humanis Prévoyance 509 753 1,973 2,481
Groupe BTP-Prévoyance 372 350 2,211 2,240
ViaSanté Mutuelle 368 314 619 592
GPP Klesia Assurances 344 313 1,000 943
BNP Paribas Cardif 342 306 2,931 2,817
Crédit Agricole Assurances 307 317 4,357 4,059
Total (Top 20) 9,379 8,927 82,389 78,927
Growth (Top 20) 5.1% 4.4%
Notes: For the full Top 20 listing, please see A.M. Best’s Briefing, “France’s Largest Cedants Demonstrate Stable Reinsurance Purchasing” Source: Best's Statement File -- Global, A.M. Best data and research
Top Cedants: France
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Retention Ratios
Company Name 2015 2014 Change
Assurances du Crédit Mutuel IARD S.A. 96.5% 96.4%
Macif 95.8% 95.3%
Société de Groupe d'Assurance Mutuelle Covéa 93.0% 92.9%
Crédit Agricole Assurances 93.0% 92.2%
AXA S.A. 90.8% 91.2%
SCOR SE 88.8% 89.5%
Groupama S.A. 88.4% 89.0%
BNP Paribas Cardif 88.3% 89.2%
La Mutuelle Générale 86.2% 85.2%
Malakoff Mederic Prévoyance (MMP) 85.0% 85.4%
Notes: For the full Top 20 listing, please see A.M. Best’s Briefing, “France’s Largest Cedants Demonstrate Stable Reinsurance Purchasing” Source: Best's Statement File -- Global, A.M. Best data and research
Expectations and Impact on Ratings
Reinsurance Market Briefing - Zurich 7 June 2017 64
Trend to continue, albeit not as pronounced
European top 20 and the rest – drivers differ
Changes in reinsurance buying not sufficiently material to have an impact on ratings
Indirect impact – capital optimisation, balance sheet protection, ERM
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Q&A Catherine Thomas
Senior Director
Upcoming Events
Reinsurance Market Briefing - Zurich 7 June 2017 66
When & Where: Sunday 10 September 2017 – 10:15-11:45 (CEST) Hermitage Hotel, Salle Eiffel II, Monte Carlo 98000, Monaco www.ambest.com/events/rmbseptembre2017 When & Where:
Wednesday 15 November 2017 – 08:30-13:00 (Briefing) & 14:00-16:00 (Seminar) etc.venues St. Paul's, 200 Aldersgate, St. Paul's, London EC1A 4HD www.ambest.com/events/imbeurope
2017 Reinsurance Market Briefing - Zurich
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7 June 2017