Growth in the global life reinsurance industry is likely to come from Asia, where global life reinsurers are benefiting from significant growth in the still nascent primary life insurance markets, says S&P Global Ratings in a report.
Asia-based life reinsurers such as China Re, Korean Re, and Taiping Re have been gaining in importance on the global stage in view of their strong positions in their respective primary insurance markets. Nevertheless, S&P does not envisage any significant shifts in global market shares over the coming two to three years, says S&P Global Ratings credit analyst Johannes Bender.
The global life reinsurance industry should experience stable premium growth of about 3% per year and a return on equity of just above 10% over 2018-2020, says the report.
"This is because the fundamental strengths of the global life re industry remain intact, in our opinion, despite some M&A activity and the emergence of alternative capital in some selected markets," said S&P Global Ratings credit analyst Sebastian Dany.
“We expect the sector's 'bread and butter' US mortality business will remain stable, with cession rates not exceeding 30% over the next few years.”
The international rating agency thinks that the industry's focus on biometric risks remains unchanged, with mortality business still dominating and morbidity growth rates remaining stable.
“Nevertheless, we expect to see increasing longevity risk appetite, in particular from longevity swap deals, mainly in the UK but increasingly also in other markets, such as the Netherlands and the US. We consider that the industry's efficient risk management practices are strong lines of defence against inherent volatility the sector is facing from changes in key actuarial assumptions for calculating premiums, regulatory risks, and data restrictions”, the report said.