Reinsurance sector ROE drops in 2024, though remains strong: Gallagher Re

Gallagher Re’s full year 2024 reinsurance market report, which analyses capital and profitability trends in the global reinsurance sector, highlights a 17% return on equity (ROE) for 2024, down from 19.5% in the previous year.

Despite this decline, it remains a strong performance for the SUBSET of companies tracked by Gallagher Re, specifically, those that disclose relevant data on natural catastrophe losses and prior-year reserve releases.

As illustrated in the image above, in 2024, the SUBSET experienced a smaller benefit from below-normalized natural catastrophe losses compared to the previous year.

The positive impact from these losses amounted to 0.8 percentage points, a decline from the 1.7 percentage points recorded in the full year of 2023.

Additionally, the SUBSET reported lower prior-year reserve releases, which contributed 0.5 percentage points in 2024, a notable decrease from the 1.3 percentage points seen in 2023.

Furthermore, capital gains were also lower in 2024, amounting to 1.6 percentage points, compared to the 2.2 percentage points achieved in the prior year.

“Prior-year releases show the lowest contribution in a decade, but this is entirely driven by the material reserving actions taken by Swiss Re in Q3. Excluding Swiss Re, prior-year experience was above recent years’ levels,” Gallagher Re explained.

When comparing performance across H1 and H2 of 2024, headline ROE was approximately five percentage points lower in H2 than in H1, where it stood at 19.6%.

Around half of this performance gap was attributed to higher natural catastrophe losses in the latter half of the year.

“After a rather benign H1 experience, natural catastrophe losses were more material in H2, driven by hurricanes Helene and Milton,” Gallagher Re said.

Underlying ROE was also reportedly meaningfully affected by various factors, including the reserve strengthening reported by Everest in its primary insurance portfolio.

“Although realised capital gains improved in H2, they were only able to partially offset the increased impact of natural catastrophe losses and the effects of non-P&C Re underwriting activities,” Gallagher Re added.

In related news, earlier today, we covered more of the reinsurance broker’s new report, which revealed that total dedicated reinsurance capital increased by 5.4% during 2024 to a new high of $769 billion, driven by growth in both traditional and alternative capital.

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