What's Happening?
Swiss Re has ascended to the top of the global reinsurer rankings following its adoption of the IFRS-17 accounting standards, according to a report by AM Best. This shift has led to a reshuffling among the top-tier reinsurers, with Swiss Re reporting $40.5 billion in gross premiums written at the end of 2023 and $36.2 billion in reinsurance revenue at the end of 2024. The change from GAAP to IFRS-17 has allowed Swiss Re to move from first among non-IFRS-17-reporting reinsurers in 2023 to first among IFRS-17 reporters in 2024. Munich Re, previously at the top among IFRS-17 reporters, has moved to second place, followed by Hannover Re. The report highlights the differences in net combined ratios under IFRS-17 and non-IFRS-17, noting that they are generally lower under IFRS-17.
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Why It's Important?
The adoption of IFRS-17 by Swiss Re marks a significant shift in insurance accounting, aiming to enhance transparency and consistency in financial reporting. This change impacts how profitability is viewed, aligning profit recognition with the delivery of insurance services. The new standard provides a more economically meaningful view of profitability, which could influence investor perceptions and market dynamics. The reshuffling of reinsurer rankings under IFRS-17 could affect competitive strategies and market positioning, as companies adjust to the new accounting framework. The broader implications for the insurance industry include potential changes in how financial performance is assessed and reported, influencing stakeholder decisions and regulatory considerations.
What's Next?
The outlook for global reinsurers in 2025 will depend heavily on natural disaster activity, such as the Atlantic hurricane season and California wildfires, which have already impacted first-quarter results. The market has seen pockets of rate softening during mid-year renewals, particularly in the Japanese reinsurance market. Companies may choose to return excess capital to shareholders rather than deploy it at inadequate rates. Improved casualty pricing could entice sidelined players to deploy capital, potentially enhancing performance and shareholder returns. However, social inflation remains a concern in the U.S. market, affecting casualty markets.
Beyond the Headlines
The shift to IFRS-17 represents a fundamental change in insurance accounting, moving from a cash-based to a service-based model. This transition aims to provide a more transparent view of profitability, which could lead to long-term shifts in how reinsurers operate and report financial performance. The introduction of separate rankings for IFRS-17 and non-IFRS-17 metrics by AM Best highlights the challenges in comparability between the two standards. This change may drive further innovation in financial reporting and influence regulatory frameworks globally.