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Global reinsurers performed well in the first half of 2021, with a further expansion of their capital bases and strong headline underwriting results and ROEs. Underlying ROEs, while less strong, were nonetheless noticeably improved, according to the latest Reinsurance Market Report from Willis Re, the reinsurance business of leading global advisory, broking and solutions company Willis Towers Watson (NASDAQ: WLTW).

Total capital dedicated to the global reinsurance industry measured USD 688 billion after the first six months of 2021, reflecting a 4% increase from 31 December 2020.1 The rise was driven primarily by strong net income. To fuel organic growth in the positive rating environment, reinsurers typically retained more income than has been usual in recent years.

Reinsurers together achieved exceptionally strong premium growth of 15% during H1 2021. Their weighted average reported combined ratio was 94.1%, which closely matches the figures reported for the 2016 to 2019 half years. Despite abnormally heavy natural catastrophe activity so far this year, the ratio marks a dramatic improvement from the Covid-impacted 104.1% in H1 2020. Reported combined ratios also benefitted from slightly higher levels of reserve releases, reversing the trend of declining releases seen since 2017.

The reinsurers’ underlying half-year combined ratio, excluding prior year development, and normalising for natural catastrophe losses, has improved steadily since 2017. This continued in H1 2021, falling from 98.6% in H1 2020 to 98.4%. A lower expense ratio supported the improved combined ratios, as rapid premium growth more than offset rising costs.

The average ROE also rebounded strongly, assisted by improved investment returns. The reported ROE recovered from last year’s minus 0.7% to reach 13.9%, while the underlying ROE more than doubled to reach 6.3%. Nevertheless, the underlying ROE still remains below the industry’s cost of capital.

James Kent, Global CEO, Willis Re, said: “Reinsurance providers will be heartened by these results. The industry has endured several years of below-par performance, capped by the calamitous experience of COVID-19. Now the remedial work reinsurers have undertaken over the past several years is bearing fruit.

“Unfortunately, though, very strong premium growth in the first half of this year was achieved against combined ratios which are not much lower than during the softer parts of the cycle, therefore leaving underlying ROEs still languishing below the cost of capital.”

Download the full report: The Willis Re Reinsurance Market Report is a biannual publication providing in-depth analysis of the size and performance of the reinsurance market. Analysis is based on the Willis Reinsurance Index group of companies. In 2021 the Index includes 43 companies from across the globe.

About Willis Re

One of the world's leading reinsurance brokers, Willis Re is known for its world-class analytics capabilities, which it combines with its reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world's top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit willisre.com

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com

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1 Willis Re’s Reinsurance Market Index tracks the capital and performance of reinsurers holding more than 80% of the sector’s capital. It includes in-depth analysis of the results of a Subset of 17 reinsurers comprising those which disclose information sufficient for detailed analysis.