The report shows that throughout 2017, the (re)insurance sector remained stable with clear signs of growth, as evidenced by high capital levels, positive profitability, and a persistent inflow of additional reinsurance capital.
Throughout 2017, the (re)insurance sector remained stable with clear signs of growth, as evidenced by high capital levels, positive profitability, and a persistent inflow of additional reinsurance capital. Nonetheless, the (re)insurance sector operates in a macroeconomic and financial environment characterised by weak global demand, low inflation rates, very low and partially negative yields, and occasional bursts of financial market volatility. This environment is challenging long-established business models of various insurance companies, mainly life insurers.
Non-life (re)insurance continues to be subject to soft market conditions. Premiums charged by non-life (re)insurers in the commercial lines, property and catastrophe markets remain under pressure, partly due to increasing competition, while investment yields are declining gradually. Competition has been especially strong in the reinsurance market – a market still operating in benign catastrophe times heading into 2017. The market is expecting an upturn in pricing following numerous natural catastrophic events in the second half (H2) of 2017.
The prolonged low interest rate environment is a source of vulnerability for life insurers especially in advanced economies. Low interest rates are putting pressure on life insurers’ capital positions, particularly those offering products with long-term guaranteed rates and having large maturity mismatches between assets and liabilities. The longer these low rates persist, the more maturing higher coupon investments will have to be reinvested at prevailing low interest rates. Insurers may respond by repricing or redesigning products to reflect these lower rates.
These issues are developed and further discussed in the four chapters that make up the 2017 GIMAR. Chapter 1 analyses the overall macroeconomic and financial environment. Chapter 2 focuses specifically on global re/insurance market developments, while Chapter 3 covers a variety of special topics focusing on regulatory, financial and economic developments and risks. One special topic looks at the investment markets and insurance investments, while others discuss public disclosure under Solvency II and the catastrophe risk modelling practices in Bermuda. Lastly, emerging market topics explore the importance of financial education and inclusion for emerging insurance markets, and the digital innovations in the insurance market in India. Chapter 4 summarises the IAIS survey of the global reinsurance market. It documents a unique global data set made possible by the participation of 47 reinsurers in nine jurisdictions in North America, Europe and Asia, and links the financial position of reinsurers to the broader financial economy.
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© IAIS - International Association of Insurance Supervisors
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