This time is different


Adapting to an evolving market

Future reinsurance trends

Reimagining the world of reinsurance and predicting the future, against a backdrop of uncertainty in the macroeconomic environment which will lead to medium-term opportunities and challenges for the sector.

Deloitte’s 2022 report analyses the three major forces that have influenced the reinsurance market since the publication of our previous report “This time is different” in 2020.

In collaboration with senior market participants, the six 2020 predictions have been revisited to assess how things have progressed since and highlight emerging trends that will impact reinsurance over the coming years.

We believe that continuing uncertainty will in the medium term create significant opportunities as well as challenges for market participants. We have already seen consolidation in the distribution space, along with a renewed focus on building data and analytics capabilities. There has been an increase in the numbers of Managing General Agents backed by participants across the value chain including brokers, risk carriers and alternative capital. There have also been significant headwinds for innovators and would-be disruptors, many of whom have failed despite industry support and collaboration.

The report consists of three parts:

  1. Part one analyses the three forces that are currently impacting the reinsurance market.
  2. Part two examines our previous predictions and how the future will evolve.
  3. Finally, part three evaluates the impact of these forces on the size, profitability and dynamics of the market

Forces shaping the reinsurance market

  • Macroeconomic forces - To date, reinsurers have sought to counter inflation with increased rates to maintain profitability. However, there are challenges to the sustainability of rate increases, and many firms are reviewing existing terms, pricing models and contract structures to establish sustainable models. Elsewhere, differing growth rates among Western economies and certain regions of the Middle East and Asia Pacific continue to challenge existing orthodoxies.
  • Environmental forces - The importance of environment, social and governance (ESG) issues will grow, in step with increasing pressure from activists. The industry is also grappling with difficult choices regarding policies and underwriting criteria.
  • Competitive market forces - Competition to attract capital and opportunities for capital to invest in different parts of the value chain will continue.

Trends shaping the future of reinsurance

In our 2020 report, we identified six core trends that we predicted would shape the future of reinsurance in years to come. We revisited these trends to understand how they’ve played out against a unique set of market forces.

We found that the Trends 1, 2 and 4, which are linked to the role of the reinsurer and the structure of the industry, have developed further.

The trends that have not developed as far as predicted are mostly related to the global economy and/or how reinsurance is transacted (trends 3 and 5), with the development of Trend 6 slowed by losses in the natural catastrophe market leading to reduced demand.

We have also identified 4 new trends which we believe are shaping the reinsurance industry

Parametric products
Reinsurance activities are affected by climate change and environmental issues. Public and political pressures are forcing reinsurers to revise their existing coverage and also review inherent underwriting models to include the wider environmental impacts.
ESG commitments
Reinsurance activities are affected by climate change and environmental issues. Public and political pressures are forcing reinsurers to revise their existing coverage and also review inherent underwriting models to include the wider environmental impacts.
Talent war
Even before the so-called “Great Resignation”, when many workers quit the labour market following the COVID pandemic, the reinsurance industry faced a shortage of talent which continues to date. Firms that can prioritise diversity, equity and inclusion are likely to succeed better at attracting scarce market talent.
Digital enablement
Over the past few years, the industry has been investing in digital technologies to improve core business capabilities and/or modernise legacy systems. Whilst some innovations have made it to the market, they have achieved only limited adoption and success. Reinsurers will need to continue to invest in innovation and collaborate with insurtechs, where this makes sense.

Market impact

Based on the above trends, we anticipate a range of outcomes for the market, in terms of its future growth, profitability and dynamics:

  • Market size - After a short-term period of volatility, increased demand and innovation in alternative capital are expected to deliver a steady CAGR of 4.3 per cent for the reinsurance market over the period 2022-32.
  • Market profitability - Profitability in the short term will be affected by the hurricane season and secondary perils. Hurricane Ian in September 2022 is going to be one of the deadliest and costliest in our recent history and will have a significant impact on market profitability for the exposed lines of business. In the medium term however, reinsurers investing in more sophisticated pricing models to account for climate change and unmodelled secondary perils can expect improved profitability.
  • Market dynamics - Market bifurcation will accelerate as firms reposition themselves to service more diverse markets and products. Larger carriers will continue to grow, becoming more diverse as balance sheets strengthen and pricing becomes more sophisticated. Meanwhile, smaller firms will focus on remaining relevant through greater specialism. Consolidation will continue.

Read the full report on our research into our predictions that are shaping the reinsurance industry.

Download our previous report here.

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