L/A and health reinsurers remain well capitalized despite high mortality: AM Best

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According to AM Best, businesses in the global life/annuity and health reinsurance segments are taking different approaches when responding to elevated mortality trends; however, these reinsurers remained well capitalized throughout the pandemic.

The report suggests that life and health reinsurers’ revenues in 2021 suffered from adverse mortality trends, although the overall impact on L/A segment earnings varies.

Best observes that offsets from revenue from other business portfolios, such as longevity, health and financial solutions, have played a role, but with the pandemic continuing into 2022, performance measures will likely continue to rise. suffer negative impacts.

Michael Porcelli, Senior Director of AM Best, commented: “It remains to be seen whether the pandemic will lead to a permanent change in mortality, or whether mortality will return to pre-COVID-19 levels once the pandemic dissipates.

“Early evidence points to different approaches to insurers’ mortality assumptions, with some choosing to update assumptions and pricing for the pandemic experience while others have not.”

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The impact of mortality pricing in the United States has been minimal, Best says, suggesting that mortality should return to normal.

In the UK, there is more expectation of a permanent change in mortality, which Best says is being felt in the longevity market and has led to increased price competition.

The U.S. traditional life reinsurance market has been pressured by historically low cession rates, according to Best, however, a notable increase in U.S. business ceded in recent years continued in 2021, with an increase of 28 % year over year.

The report says this trend has been spurred by the introduction of principle-based provisioning, the CSO 2017 mortality table and the growing use of automated underwriting.

Demand for health reinsurance solutions has increased dramatically, says Best, as major insurers face mounting pressure from high-cost claims that come with innovative treatments and new therapies.

Additionally, the rapid expansion of health insurance premiums, combined with relatively tight margins, is creating pressure on capital.

Doniella Pliss, Director of AM Best, added: “COVID-19 has somewhat slowed the rate of global health premium expansion, but has also heightened awareness of the value of health protection products. , which should fuel near-term growth.”

“Reinsurance provides a solution for capital relief and allows major carriers to focus on future growth.”

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