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Global property and casualty reinsurers were found to have strong earnings that had solid premium and investment income growth, a report by Morningstar DBRS found.

According to the report, the growth had largely benefitted from the continuous favourable pricing and interest rate environment. The report said that all of the selected global top P&C reinsurance firms saw significant net income growth during H1 2024 compared to what was recorded in the previous year except for SCOR S.E. and PartnerRe Ltd.

From the $10.3 billion recorded in H1 2023, the total aggregated net income for the same period this year has seen a 25% year-over-year increase, to a total of $12.9 billion. Notably, H1 2024 was said to be one of the costliest half years for natural catastrophe losses within the last 10 years. Despite this finding, there were a select few among reinsurers that maintained their high profitability with disciplined underwriting.

Selected Bermuda-domiciled reinsurers continued to have strong contributions to their aggregated net income even if there was a slight slowdown in the growth of the performances of underwriting and investments. Even though SCOR saw a loss during H1 2024 because of the assumption review made by its Life & Health reinsurance business, its P&C reinsurance business still reported growth.

Some reinsurers said that they experienced low natural catastrophe losses in the first quarter of 2024. However, the frequent mid-sized natural disasters that happened in Q2 2024 led to a higher but still low average combined ratio for the group which was relative to H1 2023.  It was also believed that natural catastrophe losses will increase in H2 2024.

Meanwhile, with the current high-interest-rate environment, global reinsurers continued to receive benefits since they typically reinvested their maturing securities into higher-yielding securities while maintaining a similar risk profile.

The report’s outlook for the global P&C reinsurance market continues to be positive even with the high natural catastrophe losses as well as the likely lower interest rates all around the world.

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AM Best has affirmed the financial strength rating and the long-term issuer credit ratings of Axis Capital Holdings Ltd’s operating subsidiaries, which was A (Excellent) and “a+” (Excellent) respectively.

The credit rating agency also affirmed its long-term ICR, which was “bbb+” (Good) as well as the indicative long-term issue credit ratings of the parent company. These ratings were affirmed for Axis Specialty Ltd, Axis Re SE, Axis Reinsurance Company, Axis Specialty Europe SE, Axis Surplus Insurance Company, and Axis Insurance Company.

“The group’s balance sheet strength assessment is supported by financial flexibility at the holding company level and within the operating subsidiaries, while also reflecting capital management strategies that have included consistent common and preferred dividends, as well as share repurchases,” the ratings agency stated.

It further said that in late 2023, the firm had strengthened the reserves on its casualty book following an evaluation and review of claims for accident years of 2017 to 2022, which were impacted by the higher social and economic inflation that was not anticipated.

“However, prior to 2023, Axis had reported favourable reserve development for about nine of the past ten years, testament to the company’s reserving controls efficiency. Financial leverage is elevated when compared with its peers but remains largely in line with the company’s expectations,” said AM Best.

AM Best rated the firm’s operating performance as adequate because its underwriting results over the last five years were volatile. However, it also said that the corrective measures that were implemented in the last two years in order to mitigate volatility like leaving the property-catastrophe reinsurance business led to more stable earnings.

“These changes have favourably impacted profitably measures with the group’s loss and combined ratios improving significantly,” said AM Best.

Axis’ business profile was also assessed as favourable because of how the group was consistently part of the credit rating agency’s Global Reinsurance 50 largest reinsurance enterprises as well as its excess and surplus ranking.

“The group’s ERM is sophisticated and embedded throughout the organisation. AM Best believes that Axis’ risk management is appropriate given its complex risk profile,” said the credit rating agency.

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Gallagher has announced the appointment of Bruce Dettling (pictured) as global head of mining and heavy industry, a newly established role aimed at strengthening the company’s global specialist practice in this sector.

Dettling will officially join Gallagher in November and will report to Malcolm Payton, CEO of property and casualty insurance solutions and head of global fac at Gallagher Specialty.

Dettling brings over 20 years of senior-level broking experience to Gallagher, having most recently served as head of mining at Aon in London. His career includes positions at Lloyd & Partners and Marsh, where he specialized in mining and associated industries, as well as property and casualty broking.

Gallagher highlighted that its mining and heavy industry sector specialists provide support to companies of all sizes with their operations, projects, and investments worldwide.

The mining sector faces a variety of risks, including natural catastrophes, machinery breakdowns, environmental and transportation hazards, and financial risks. Gallagher’s client base spans 25 different commodities, and the team offers extensive industry-specific expertise.

Payton stated that Dettling will be an excellent leader for the global mining team. He also noted that Dettling’s extensive experience and strong client relationships align well with Gallagher’s approach and will further reinforce the company’s expertise in the mining and heavy industry sectors.

Gallagher’s last high-profile appointment came in July, when the global financial services giant named Richard Harries to its board of directors, bringing in a seasoned professional with over 35 years of insurance sector experience.

Harries’ extensive career spans various senior roles across the UK and other heavily regulated markets. Notably, he previously served as chief executive, chief underwriting officer, and energy underwriter at Atrium Underwriters Limited. His tenure at Willis Faber & Dumas saw Harries in significant positions within the energy sector.

In other developments, Gallagher also recently published its financial results for the second quarter of 2024 – a period described by chair and chief executive J. Patrick Gallagher, Jr. as excellent.

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About six in 10 firms are reporting a decline in employee engagement in using hybrid work models.

A survey by Zoom found that 84% of organizations in the Asia Pacific have either a hybrid or remote working model.

Encouragingly, 83% of employees said that they are most productive in hybrid settings. And 87% of leaders in APAC considered increasing productivity to be the biggest consideration when determining the best working style for their company.

However, six in 10 leaders report a decline in employee engagement due to this approach, found the survey of more than 600 IT and C-suite leaders and nearly 1,900 knowledge workers across the globe, including 604 in APAC.

“Workplace flexibility is not only becoming increasingly commonplace in the APAC region, but more diverse in itself — ranging from flextime to location, role, and even rotation-based models,” noted Ricky Kapur, head of Asia Pacific, Zoom.

“Leaders today are faced with a new challenge of finding the best-fit hybrid model while keeping up with the evolving expectations of a multi-generational workforce and the impact of rapidly advancing technologies like AI.”

Generative AI ‘makes it easier to do my job’

A majority of employees (81%) agree that the tools and technology their organisation currently uses for remote work needs improving, highest among the other regions surveyed, found Zoom.

And organisations are already seeing the benefits of incorporating AI: 85% of APAC leaders believe that generative AI has made their workforce more productive, while 69% of employees in the region strongly or slightly agree that “generative AI makes it easier to do my job.”

However, significant barriers to generative AI adoption for employees in APAC still remain:

• 70% believe that generative AI has a high learning curve.
• 63% are not yet comfortable with generative AI.
• 55% are concerned that generative AI will negatively impact their job/position.

“While our study shows that APAC leaders generally recognise the productivity benefits that adopting AI at work can bring to their teams, many are not utilising AI to their full potential. As organisations seek to reduce friction in the transition to hybrid ways of working, AI is a critical tool at their disposal to help employees collaborate better and feel more connected to each other,” said Kapur.

“Beyond direct productivity benefits, leaders should look toward exploring more AI use cases to engage, inform, and connect employees. This will be key to building and maintaining company culture amidst changing workplace dynamics,” he said further.

Commercial insurers and reinsurers are navigating a rapidly evolving landscape shaped by changing customer expectations, technological disruption, and competition from new and non-traditional players.

According to insights from consultancy EY, the industry is experiencing a shift from its traditional linear value chain to a dynamic value exchange, which is creating new opportunities for innovation and growth.

EY’s latest NextWave report outlines how inefficient processes and misaligned incentives of the past are being replaced by direct connections, real-time data feeds, and new services such as risk prevention.

The report suggests that the foundation many insurers established by automating core operations in the aftermath of the pandemic can now be built upon with analytics-driven capabilities essential for future growth.

A key recommendation from EY is for re/insurers to maintain a rigorous focus on client needs and a clear purpose to drive product and service innovation. Enhanced digital capabilities, increased organizational agility, and new talent across the enterprise are identified as critical elements for achieving operational excellence and stronger financial results.

EY identifies four focal points that are essential for leadership in the commercial and reinsurance markets:

• Innovation – EY emphasizes that innovation should be guided by a clear purpose to deliver client value. The insurance industry’s role in protecting against significant threats such as cybercrime, climate risk, and geopolitical conflicts is more relevant than ever.

  As insurers develop tailored policies based on deep client insights, these policies will gain greater value when aligned with a clear purpose that generates social value. EY suggests that new and enhanced services will eventually replace existing policy types within holistic value propositions that include proactive risk prevention and advisory services.
   

• Connectivity – According to EY, building on baseline digitization is crucial for optimizing the entire business. To deliver insight-driven services and tailored products at scale, insurers need sophisticated front-end solutions, highly automated back-office operations, and advanced data management and analytics capabilities.

  EY advises insurers to focus on transformation investments that provide value across the business, rather than merely implementing point solutions. The report highlights that real-time connectivity enables a dynamic value exchange, and common data standards within the industry will facilitate quick, transparent data sharing.
   

• Community – EY notes that collaboration and co-creation are key to driving value, as few insurers can address all customer needs alone, especially in the face of large-scale threats like climate change and cyber risks. By forming or joining ecosystems, insurers can leverage extensive connectivity and focus on roles that align with their core strengths.

  EY suggests that insurers should design ecosystems around distinct customer needs, deploy advanced IT architectures for secure data sharing, and utilize outsourcing to scale operations in line with demand.
   

• Talent – Despite technological advancements, EY underscores the importance of putting humans at the center of the insurance enterprise. Creating a culture that values collaboration and creativity is essential for attracting the right talent.

  EY recommends that insurers seek diversity at executive levels, embrace leadership that links work to a broader purpose, and build compelling employee value propositions to develop a more diverse and effective workforce.

Overall, EY’s insights indicate that success in the commercial and reinsurance markets will depend on insurers’ ability to innovate with purpose, enhance connectivity, collaborate effectively, and prioritize talent development in an increasingly complex and competitive environment.

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As 2024 progresses, secondary peril events, particularly severe convective storms (SCS), are causing significant damage to residential properties, commercial enterprises, and their insurers, as per the latest report from Gen Re.

Predictions at the start of the year suggested that a rapid transition from an El Niño to a La Niña climate cycle, combined with other factors like the sun entering its solar maximum, would lead to an exceptionally intense SCS season in 2024. These forecasts anticipated a higher-than-average number of tornadoes, marking the most significant activity since 2020 and 2021.

Additionally, warmer and wetter conditions were expected to result in more tornadoes than hail events, contrasting with the cooler, drier atmospheres that typically foster hail formation.

Gen Re’s analysis through the end of July appears to support these forecasts. Tornado occurrences are approaching historic highs, both in terms of numbers and annual trends.

Simultaneously, the frequency of wind events – encompassing windstorms, high winds, and damaging winds – is significantly above historical norms.

Conversely, the number of hail events involving stones of at least 1 inch in diameter is trailing behind historical expectations, aligning with the projected shift in weather patterns. Despite this, severe weather continues to drive an increase in both the frequency and severity of losses.

According to insights from Gen Re, whether these trends persist remains uncertain, but the impact on the insurance industry is clear. In this volatile environment, proactive risk management and careful accumulation control are essential.

Additionally, pricing strategies must adapt to the heightened uncertainty brought by these evolving weather patterns.

In a separate report, Demex noted that insured losses from severe convective storms (SCS) in the first half of 2024 have accounted for the majority of global catastrophe losses, with the United States experiencing a significant increase in insurance payouts.

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Dedicated reinsurance capital rose by 7% in 2023 to $568 billion, with a further increase anticipated in 2024, according to a new report from AM Best.

Traditional reinsurance capital grew by $57 billion, or 14%, year over year, reaching $468 billion in 2023. This increase was largely driven by robust returns reported by Bermudian companies, with substantial capital growth, excluding Berkshire Hathaway’s National Indemnity.

AM Best projects continued growth in the reinsurance market through 2024, estimating total dedicated reinsurance capital for year-end 2024 at between $620 billion and $625 billion. This projection includes an anticipated 10% rise in traditional capital.

Despite these increases, since 2018, traditional reinsurance capital has accounted for less than 60% of the consolidated shareholders’ equity of companies identified as reinsurance writers, dropping to 49% in 2023 as reinsurers increasingly expand into primary and specialty insurance lines.

Third-party reinsurance capital saw a smaller increase of 3.7% in 2023, reaching $100 billion, according to the report. AM Best collaborates with Guy Carpenter to estimate the total capital supporting the reinsurance industry, with AM Best estimating traditional capital and Guy Carpenter estimating third-party capital.

The third-party reinsurance capital estimate for 2024 is projected to be between $105 billion and $110 billion, driven by growth in catastrophe bonds and collateralized reinsurance.

Dan Hofmeister, associate director at AM Best, noted that capital in the industry has grown rapidly due to higher retained earnings and reduced mark-to-market investment losses. He added that the absence of startup reinsurers has allowed traditional reinsurers to maintain their market shares without needing to adjust to softening conditions.

According to Hofmeister, the reinsurance market is well-positioned to handle a reasonable level of losses and continue growing capital.

The reinsurance market realigned during the January 2023 renewals following years of underwhelming underwriting and operating returns that did not meet the cost of capital. Some reinsurers exited the property catastrophe space, while others adjusted their risk profiles by raising rates and increasing attachment points.

This shift led to operating returns at levels not seen in nearly three decades. Through the first half of 2024, the property reinsurance market has stabilized, with slight softening at the highest attachment points.

AM Best forecasts that the reinsurance market will continue to thrive in 2024, with higher investment returns and similar underwriting risk positions to those in 2023. The market is expected to generate returns on capital exceeding 10% by year-end 2024, although these could be tempered by dividends and an active hurricane season.

However, the market appears capable of absorbing a reasonable level of underwriting losses while still achieving capital growth.

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Bermuda-based legacy re/insurer Compre Group Holdings has completed a legacy reinsurance transaction with Accelerant, a data-driven risk exchange platform.

The transaction, which has received approval from the Bermuda Monetary Authority (BMA), was underwritten by Compre’s Bermuda-based reinsurer, Pallas Reinsurance Company Ltd, and will provide approximately $150 million in coverage on loss reserves.

The portfolio involved in the transaction includes a mix of US and European property and casualty liabilities, covering Accelerant’s retention for the 2020 and 2021 underwriting years. Compre has also indicated that it will offer terms for future underwriting years as they mature.

The transaction was brokered by Augment Risk, with legal advice provided by the UK and US teams from Willkie Farr & Gallagher.

Will Bridger (pictured above), CEO of Compre, commented that the transaction demonstrates the company’s ability to create structured reinsurance solutions aligned with Accelerant’s strategic goals. He emphasized the ongoing partnership between the two companies.

Jeff Radke, CEO of Accelerant, also stated that the deal is an important step in the development of their Risk Exchange as they continue to innovate within the insurance industry.

Andrew Matson, CEO of Augment Risk, highlighted the significance of the transaction in establishing long-term retrospective partnerships and underscored the role of bespoke capital solutions within the insurance value chain.

Compre has also recently reported its financial results for 2023, marking the strongest performance in the company’s three-decade history.

Gross insurance reserves under management surged by 112% year-over-year, reaching $1.6 billion by the end of 2023, largely due to newly acquired reserves exceeding $1 billion. Invested assets totaled $2.4 billion, benefiting from locking in investment yields at the peak of the interest rate cycle.

Tangible net asset value increased by 67% to $784 million, and operating profit grew by 15% to $81 million. Profit after tax stood at $279 million, with an adjusted operating return on opening tangible equity of 19.9%.

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To commemorate reaching its five-year anniversary, Latin Re – the first Brazilian broker to secure a Lloyd’s licence – threw a celebration in São Paulo, drawing over 500 attendees, including insurers, brokers, and other industry participants from over 10 countries. The time and date chosen – August 8 at 8pm – was a deliberate representation of the firm’s ambitions, according to founder and CCO Felipe Aragão (pictured left) – because, by inverting the number eight, you get the infinity sign.

It has been a whirlwind journey for the business which obtained its operating licence in August 2019, enjoying only months of trading before the COVID crisis hit. “Ours is a success story but it has been a challenging one, which makes us even more proud,” noted CEO Maria Eduarda Bomfim (pictured right). Now, the firm’s focus is on the future as it continues to pursue an internationalization strategy, while further consolidating its brand in Brazil.

Latin Re’s internationalization strategy

Aragão highlighted that it’s a great time to be pursuing an internationalization strategy given how the market has evolved post-COVID. Where once it was a lot more formal and heavily reliant on in-person meetings, it has increasingly welcomed the accessibility of remote working, video conversations and emails. That’s not to say the market doesn’t miss an element of the personal touch, he said, and that’s especially true across Latin America where the emphasis Latin Re places on access to decision-makers is resonating strongly.

“So, we started our Miami operation last year, as well as obtaining our Lloyd’s licence, which has increased our demand not just from Brazilian wholesale but most of Latin American wholesale,” he said. “It’s a process not just of opening offices, but now obtaining licences all around Latin America. We’re doing something no other Brazilian company has done before which is doing business overseas but using our Brazilian licence.

“We were recently approved in Peru and we’re expecting the approval for Colombia and Guatemala. We’re already doing a lot of business in Mexico with local partners, and we are very confident that demand is coming from clients that have more of a Latin culture. And that includes both French and Spanish companies.”

What sets Latin Re apart in the market?

Central to the DNA of the firm is its commitment to serving as a marketplace for reinsurance, Eduarda Bomfim said, which means serving partners from all across the re/insurance ecosystem. Latin Re has established itself as a provider of solutions for the complex and specific needs of insurance and reinsurance entities alike. It’s quite a unique approach in that it sees the firm partner with companies which would traditionally be seen as competitors.

“But they are not competitors, because we are able to zoom in on specific and very niche needs, whereas the mega brokers don’t have the ability because they are washed out with so many demands and so many global programs and international institutional demands,” she said. “That goes to the DNA of what we’re building – as a solutions provider in the market, whether that’s retail, reinsurance, treaties or alternative alternative risk transfer.”

Growing a business without losing its shape

Eduarda Bomfim noted that when Aragão started the firm, he was meticulous in hand-choosing every single partner, including herself, and that they had all worked together previously at another brokerage. Having the right people early on inevitably lends itself to having a big will to succeed, she said, and they were each passionate about the opportunity that had opened up due to market consolidation.

Latin Re is on course to finish out 2024 with 60-plus people – having grown at a rate of about one key hire a month since its inception. Whether hiring on the operations, claims, or broking side of the business, Aragão and Eduarda Bomfim each highlighted that every care is taken to ensure they’re attracting and retaining the right people in order to grow quickly, without losing quality of service.

When it launched, the names of its partners were signifiers of its quality and ambition, Eduarda Bomfim said but five years on Latin Re is being recognized across the market. That puts it in a different phase of its growth journey because it’s now being reached out to by people who would like to join the business. Aragão highlighted that the company has also reached the stage where it has appointed its first partner from inside the team, and not outside the company – and projects to have its first ‘home-grown’ partner in the next 12-24 months.

What’s next for Latin Re?

As for what the future holds, he shared that when Latin Re started, its goal for the first two-to-three years was to be the best Brazilian reinsurance broker. It was only when it had enough people that it was able to spot where it differentiated itself from the rest of the market and could add further value to its partners across the re/insurance market. It’s still part of its ambition for the future, but only part of a growth objective that has evolved and changed as the business has done the same. “We are not sales company,” he said. “We are more of a service company.

“We focus on the service, we focus on the demands of our clients and we adapt very quickly to their changing expectations. We really believe that in the next five years, we’re going to have a big effect among the Iberia and Latam regions. And hopefully, we will be as recognised across that whole region as we currently are in Brazil. So, our 10-year party is going to have to be a lot bigger than our five-year party!”