Reinsurers in the Asia-Pacific region have witnessed a remarkable surge in return on equity (ROE), reaching 9.2% in 2023, a substantial increase from just 0.1% the previous year, according to a recent AM Best report. This notable improvement is largely attributed to a more favorable investment climate and lower-than-anticipated catastrophe losses.
The AM Best report underscores that while Asia-Pacific reinsurers, who have traditionally concentrated on property lines and proportional treaties, did not directly benefit from the global reinsurance rate hardening, they have managed to sustain stable operating performance over time. Expanding operations internationally has been a key strategy for enhancing profitability, although China’s economic recovery from the COVID-19 pandemic continues to pose challenges.
AM Best’s composite index, which includes companies reporting under IFRS 17, indicated that Asia-Pacific reinsurers achieved a combined ratio of 91.6% in 2023, marking a 2.9-percentage-point improvement from the previous year.
The rise in ROE is attributed to a rebound in both realized and unrealized investment losses and increased investment income, driven by a higher interest rate environment. Improved underwriting results also played a significant role in this positive performance, although China’s performance remained an outlier.
Christie Lee, Senior Director and Head of Analytics at AM Best, highlighted that underwriting strategies for 2024 will vary depending on each reinsurer’s capacity to secure retrocession and manage the underwriting cycle.
Major reinsurers in the region have recalibrated their catastrophe capacities in domestic markets to mitigate potential losses. Concurrently, some are targeting mature markets to capitalize on rate increases, adapting their strategies to navigate the evolving landscape.
