TOTAL RETURN REINSURERS STRUGGLE TO CURB VOLATILITY: REPORT

Total return reinsurers have struggled to contain the volatility of their investments and results and have underperformed reinsurers that make up the Bermuda composite, according to ratings agency AM Best. Between 2014 and 2019, five total return reinsurers examined by Best showed a combined ratio of 111.2% compared to the Bermuda composite’s combined ratio of 98.4%. That underperformance is driven by total return reinsurers’ concentration of business in medium-term casualty lines and their relatively short tenure compared with long-established Bermudian companies. Their return on equity over the five years averaged -0.3%. Best noted the total return reinsurers have shifted their investment allocation so that 20% to 50% of invested assets are allocated to risk versus an earlier allocation of 80% to 90%. Best said that adjustment could help diminish volatility.