In a recent report by AM Best, titled “Life/Annuity Reinsurers Remain Prepared for Growth,” global life reinsurers are seen weathering the storm of excess mortality with cautious optimism. Despite facing challenges due to elevated life claims, the industry appears poised for continued growth.

The report, part of AM Best’s comprehensive analysis of the global reinsurance industry leading up to the Rendez-Vous de Septembre in Monte Carlo, highlights several key points:

1. Well-Capitalized Industry: The global life/annuity reinsurance segment is robustly capitalized, indicating a strong foundation for future growth. This capital strength has played a crucial role in mitigating the impact of COVID-19 on life reinsurers, which has been less severe than initially anticipated.
2. Mortality Trends: Elevated mortality rates, particularly in certain demographics, have been observed during the pandemic. However, it remains uncertain whether this will result in a permanent shift in mortality patterns or a return to pre-pandemic levels.
3. Pricing Uncertainty: The report raises questions about the short- and long-term implications of pandemic-related mortality on industry assumptions and pricing. Some insurers have adjusted their assumptions and pricing to account for pandemic experiences, while others have not.
4. Global Variations: Mortality pricing adjustments have varied globally. In the United States, the impact has been modest, while Europe has seen adjustments due to worsening trends. In the United Kingdom, many insurers have raised premiums by 15-20% to address heightened mortality risks.
5. Emergence of New Players: The report notes the emergence of private-equity-backed insurers in the annuity and block reinsurance markets, injecting fresh capital into the industry.
6. Long-Term Focus: Edward Kohlberg, director at AM Best, emphasizes the importance of a long-term perspective for capital providers in the life reinsurance segment. Patience and a strategic outlook are crucial for achieving business goals in this field.
7. Resilience: Despite heightened investment volatility and elevated mortality rates, traditional life reinsurance carriers are expected to maintain healthy risk-adjusted capitalization throughout 2023 and 2024. Prudent asset-liability matching remains a cornerstone of their risk management strategies.

In conclusion, the global life/annuity reinsurance industry faces the challenge of excess mortality with cautious optimism. Strong capitalization, adaptation to shifting mortality trends, and the entry of new players position the industry for continued growth, while the long-term focus on strategy and risk management remains crucial. The full scope of the impact of the pandemic on this industry will continue to unfold as it navigates the complexities of evolving mortality patterns.

Sources:

1. Asia Insurance Review
2. AM Best Report
3. World Health Organization
4. European Commission – Excess Mortality Statistics
5. eLife Sciences – Tracking Excess Mortality