ARA’s CR improved by 10pp in H1 despite cat losses doubling: Aon

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According to Aons Reinsurance Aggregate (ARA), the sector’s combined ratio improved from 104.4% in the previous year to 94.0% in 2021 in the first half of the year, although natural catastrophe claims more than doubled this year.

Aon notes that the impact of COVID-19 losses has been greatly reduced, showing the underlying benefit of the cumulative rate increases achieved over the past few years.

The result was that all but one of the companies achieved underwriting profitability in their entire property and casualty business during the period.

It did so despite $ 4.9 billion in natural catastrophe losses, which added 5.1 percentage points to the ARA combined ratio, with winter storm Uri accounting for the largest single loss.

ARA writes over 50% of the world’s life and non-life reinsurance premiums and is seen by AON as an appropriate proxy for the entire reinsurance sector.

The 22 companies included in the study are Alleghany, Arch, Argo, Aspen, AXIS, Beazley, Everest Re, Fairfax, Hannover Re, Hiscox, Lancashire, Mapfre, Markel, Munich Re, PartnerRe, QBE, Qatar Insurance, RenRe, SCOR, Swiss Re, SiriusPoint and WR Berkley.

ARA reported pre-tax profits of $ 16.7 billion in the first half of 2021, compared to a pre-tax loss of $ 0.9 billion in the first half of 2020, which was heavily impacted by the outbreak of the pandemic.

This was driven by P&C underwriting profit of $ 5.8 billion, investment income of $ 11.3 billion and capital gains of $ 6.3 billion, reports Aon.

The impact of COVID-19 on ARA’s reported results decreased significantly in the first half of 2021.

On the property and casualty side, new losses totaled $ 0.7 billion, adding 0.7 percentage points to the combined ratio, even though companies that wrote significant amounts in the life and health reinsurance business incurred additional losses of $ 2.0 billion suffered from this business, mainly due to excess mortality.

Aon also noted that the development of the property and casualty provisions in the previous year continued to be favorable overall, but that the earnings support from this source has been greatly reduced. Across the ARA, releases totaled $ 1.2 billion in the first half of 2021, reducing the combined ratio by 1.2 percentage points.

ARA’s cash and investments totaled $ 886 billion as of June 30, 2021, unchanged from the end of 2020.

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