U.S. Reinsurers See Combined Ratios Soar

London Editor

Figures released last week by the Reinsurance Association of America reflect the devastating effect of World Trade Center losses on U.S. reinsurers, with the industry's combined ratio through three quarters soaring to 139.5.

The RAA said the combined ratio reported by a group of 30 U.S. property-casualty reinsurers for this year so far compares with a figure of 112.2 reported by a similar group of reinsurers through the third quarter of 2000. The 2001 ratio is attributable to a 109.5 loss ratio and a 30.0 expense ratio, the Washington-based RAA said.

Don Watson, director of insurance ratings at S&P in New York, said the industry's loss ratio for the third quarter would prove to be the worst ever reported by the industry for a single quarter. “It will surpass the loss ratios reported for Hurricane Andrew and Hurricane Iniki in 1992,” he said.

(RAA does not release loss ratios for individual quarters after the first quarter. However, the loss ratio for the first half of this year was 85.7, demonstrating the tremendous impact third-quarter losses had on industrywide results.)

RAA reported that policyholder surplus for the 30 companies dropped from $23.8 billion during the nine-month period in 2000 to nearly $23.0 billion during the nine-month period in 2001.

Significantly, this is the first public evidence of a reduction in capacity in the reinsurance industry, noted Mr. Watson, who predicted that this will lead to further rate increases. “At this point in time, S&P sees about a $15 billion loss for the global reinsurance industry from the World Trade Center and a $10 billion loss for the primary industry, with the expectation that both numbers will continue to rise,” he said.

The RAA's group of 30 U.S. p-c reinsurers wrote $19.5 billion of net premiums during the first nine months of 2001, compared with $18.5 billion for the same period last year. The 5.5 percent increase demonstrates that there was some rate improvement in 2001, Mr. Watson said.

An alphabetical selection of individual company combined ratios during the nine-month period include:

American Re-Insurance Company at 136.1 for the nine-month period of 2001, compared with 114.3 last year.

Axa Corporate Solutions Reinsurance at 125.5, compared with 108.5.

Berkley Insurance Company at 130.5, compared with 108.1. (Last year, Berkley was listed under the name Signet Star Reinsurance.)

CNA Re at 293.6. Last years figure of 109.0 includes combined U.S. and non-U.S. affiliate operations.

Everest Reinsurance at 115.6 compared with 104.6.

Folksamerica Reinsurance at 115.8, compared with 110.7.

General Re Group at 167.6, compared with 111.9.

Gerling Global Reinsurance at 124.0, compared with 113.7.

Odyssey America Re at 113.7, compared with 107.8.

Overseas Partners U.S. Re at 120.0. (No comparisons can be made with last year, as the company started up in October 2000.)

Partner Re U.S. at 114.1, compared with 112.5.

PMA Capital Insurance at 126.5, compared with 125.8.

PXRE Reinsurance at 138.4, compared with 142.2.

QBE Reinsurance Corp. at 106.0, compared with 111.1 last year.

SCOR U.S. Group at 113.6, compared with 140.4.

St. Paul Re at 143.7, compared with 112.3.

*Swiss Reinsurance American Corp. at 176.3, compared with 115.9.

Transatlantic Re Company/Putnam Re Company at 116.7 compared with 100.7.

Trenwick America Corp. at 125.7 compared with 131.5.

Zurich Reinsurance (NA) Inc. at 111.8, compared with 112.0.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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U.S. Reinsurers See Combined Ratios Soar

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