Deutsche Bank has reported that European reinsurance results for the first quarter of 2018 are expected to return to normal after a challenging 2017, with technical profits anticipated to be up due to the absence of severe natural catastrophe claims.
Q1 reports should reflect a solid earnings season, although results have been offset by pressure on investment income, resulting in a normal level overall, said Deutsche Bank.
While there were a series of global Q1 nat cat events, Deutsche Bank does not expect reinsurers to have exhausted their quarterly catastrophe budgets, and it anticipates that technical levels are above average.
These factors are expected to be offset by market volatility, with rising yields, widening spreads, and lower equities reducing the potential for realised gains and depressing investment income, leaving net profits at around normal levels.
Deutsche Bank estimates that most European reinsurers utilised between 50% and 90% of their Q1 natural catastrophe budgets, with costs largely attributable to severe winter weather in Europe and the U.S.
It also expects earthquakes in Peru and Taiwan, droughts in Argentina, and wildfires in Australia to have had a considerable impact on reinsurance costs, as although some of these events appeared to be small in absolute numbers, they may show bigger losses on an individual basis.
Windstorm Friederike in particular may have had some impact on an individual basis, although Deutsche Bank notes there will be no losses from French storms or floods, as national nat cat losses are covered by the French public reinsurer CCR.
