Life & health reinsurance

Market overview

The size of the global life reinsurance business was around USD 70 billion in 2016. Most (65%) of this stems from the US, Canada and the UK. Ceding companies from emerging markets accounted for only 14% of global demand. Life reinsurers are increasingly diversifying away from traditional mortality business.

Market performance

The life reinsurance industry registered a 2% increase in 2016. 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 driving 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 risks, are estimated to have grown by 1.5% in real terms in 2016. In mature markets, a 0.5% increase was driven by positive developments in Canada, the UK, Japan and Australia, while premiums in the US contracted as a result of lower cession rates and weakness in protection sales. In the emerging markets, premiums grew by 9%, driven largely by China, with other emerging markets seeing more modest growth.

The operating margin of the life reinsurance industry was 7% of revenues in 2016, slightly up from 2015, based on improvements in the underwriting results. The contribution from investments further declined, due to the ongoing low interest rate environment.

Outlook

World premiums in traditional life reinsurance are expected to increase only marginally over the next two years, driven by emerging markets, especially China. Premiums in the advanced markets are expected to be roughly flat, with modest growth in Australia, Canada, Japan and some Western European countries offsetting declines in the US and UK. In emerging markets, life reinsurance premiums are expected to increase by about 8%‒9%.