Last year, the reinsurance sector was battered down by huge losses resulting from natural disasters.
The disasters that lead to the enormous insured losses included the earthquakes in New Zealand, the flooding in Thailand and Australia, and the tsunami following the earthquake in Japan. These were all top events discussed in the most recent survey results from the Reinsurance Association of America.
Catastrophe losses considered, the combined ratios for most reinsurers within the group were reported to have fallen. According to the executive director covering property and casualty insurance at Morgan Stanley, George Locraft, the industry saw the second highest losses from catastrophic events in its history last year. He went on to say that the industry experienced over “$1 billion loss events than any year in history, so it was just the frequency and severity of the catastrophes that is driving results.”
Regardless of the strategy to decrease the risk seen by a reinsurer through geographic diversification, the Fitch Ratings Ltd. senior director of insurance, Brian Schneider, said that those who were more diversified within the cat risk in 2011 often saw worse results than those with less diversification.
Moody’s Investors Service vice president and senior credit officer, James Eck, also pointed out that though some reinsurers were not affected by Thailand and Japan’s disasters and did better than others, all reinsurers were impacted in some way by the catastrophes in 2011. He explained that because most reinsurers have global involvement, when there is a large event, they are bound to face some loss.
