War, climate, Covid weigh on outlook for reinsurers

The Russia-Ukraine conflict, climate-related losses and legacy coronavirus issues weigh heavy on the outlook for reinsurers in 2022.

Market volatility resulting from the ongoing conflict in Ukraine is already affecting equity market valuations, according to DBRS Morningstar.

Despite these headwinds, the outlook for the P/C reinsurance market remains positive, however, with renewal rates still trending upward and economic activity increasing globally.

“The fallout from the Ukraine conflict may negatively impact investment performance through lower equity market valuations and lower bond market values as central banks act to curb higher inflation expectations,” says Victor Adesanya, vice-president, insurance. “DBRS Morningstar's outlook for the P/C reinsurance market remains positive. We anticipate that the reinsurance industry will be able to maintain strong capitalisation in the near future as some companies issue new equity and debt, while benefitting from an insurance market that continues to experience a favourable pricing environment."

Despite higher catastrophe losses, reinsurance companies performed significantly better in 2021 compared with 2020, thanks to stronger underwriting profitability and improved investment income.

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