Life & health reinsurance

Market overview

The size of the global life reinsurance business was around USD 65 billion in 2015. Most (70%) of this stems from the US, Canada and the UK. Ceding companies from emerging countries accounted for only 6% of global demand. Life reinsurers are increasingly diversifying away from traditional mortality business.

Market performance

The life reinsurance industry registered a currency-driven decline of 3%. Currency- and inflation-adjusted premium income rose by 3% in 2015. The Accident & Health business supported some premium growth, as did large annuity and longevity contracts. Meanwhile, other business lines had weak organic growth and some treaties were cancelled. Health and annuity transactions are expected to continue to drive growth in the coming years and also help reinsurers in the UK and North America diversify away from traditional mortality business.

Global premiums in traditional life reinsurance, consisting of mortality and morbidity, are estimated to have grown by 2% in real terms in 2015. In mature markets, a 1% increase was driven by positive developments in the UK and the large continental European markets, while premiums in the US continued to contract as a result of lower cession rates and still-weak protection sales. In the emerging markets, premiums grew by 8%. Growth in Asia (particularly China) and Latin America was strong, mirroring the primary market.

The operating margin of the life reinsurance industry was 8% of net premiums earned in 2015, compared to 7% in 2014, based on improvements in the underwriting results. The contribution from investments further declined, due to the ongoing low interest rate environment.

Outlook

Traditional life reinsurance is expected to continue to stagnate in the next few years, driven by ongoing contraction of this segment in the US and in UK, while other mature markets will record moderate growth in line with the growth of protection business on the primary side. In emerging markets, life reinsurance is expected to increase by about 6%‒7%. By contrast, the pressure on a number of primary life insurers will likely generate steady demand for capital solutions and other forms of non-traditional reinsurance.