Tuesday, October 2, 2012

Global insurers weather financial crises – IAIS report

     Insurance companies worldwide escaped relatively unscathed from the global financial crises and were better capitalized at the end of 2011 – the year of the Japanese earthquake/tsunami - than at the end of 2007, according to the first-ever report on the global insurance market.
    The Global Insurance Market Report (GIMAR), which covers the period between 2007 and 2011, was released by Basel-based International Association of Insurance Supervisors (IAIS) and covers both primary insurers and reinsurers.
    “Overall reinsurers lost more equity due to the financial crises in 2008 than they lost due to the unprecedented catastrophes in 2011,” said the report, adding that economic losses from 2011’s 820 natural disasters and nearly 30,000 deaths exceeded $350 billion, the largest losses in history.
    The amount of insured losses in 2011 was around $105 billion, the second largest in history after 2005’s $120 billion (in 2011 value) when the U.S. Gulf Coast was hit by hurricanes Katrina, Rita and Wilma.
    Worst affected by the global financial crises was the general insurance sector, known as non-life insurance in some countries, with premium growth hit hard in 2009 and 2010, especially in Western Europe where premiums written contracted by nearly 6 percent in 2009 and just over 1 percent in 2010.
    The life insurance business was less affected by the crises with some deterioration seen in 2009 and then a one percent contraction in 2010. The reinsurance sector was least affected, with premium growth rates remaining positive from 2008 through 2011.
    GIMAR, which IAIS intends to publish twice a year beginning next spring, is based on a sample of public data from 20 globally active insurers and reinsurers and confidential data from 48 large global reinsurers.
    Like most investors, the insurance industry became more cautious in its investments during the financial crises, with the proportion of fixed income investments rising to 61 percent from 56 percent between 2011 and 2007.
    Meanwhile, the share of investments allocated to equity declined to 7 percent from 11 percent by 2011, an overall shift that reduces the short-term risk of the insurers’ balance sheets, but “it comes at the price of higher interest rate risk at some time in the future,” the report cautioned.
    But overall, the sector’s return on investments (ROI) during the crises was resilient, with 75 percent of all primary insurers reporting positive returns throughout the whole period, the report said.
     Reinsurers also showed positive returns through the crises with the average ROI falling to a minimum 2.49 percent in 2011 from a maximum of 3.15 percent in 2007.
    The report tracked the development of the insurance sector’s equity capital from the end of 2007 and it shows a short-lived hit from the financial crises. By the third quarter of 2010, all losses by the primary insurance sector was recovered.
    Reinsurers were even more resilient, with a small temporary loss that was fully recovered by the third quarter of 2009.
    “By the end of the period, the reinsurers in our sample reported an aggregate equity capital of 130.8 percent relative to the 100 percent reported in the fourth quarter of 2007,” GIMAR said.

    www.CentralBankNews.info

0 comments:

Post a Comment