According to Fitch Ratings, the profitability of the global emerging market reinsurer group, which includes Patria, Ocean Re, Eureka Re, Oman Re, and ASR Re, has been strong, with return on equity generally ranging from 5% and 22% over the past two years.
According to Fitch, most reinsurers in this peer group benefit from sound underwriting and investment performance, but must further consolidate their track record.
Patria is reportedly the best-performing in the peer group, as evidenced by its consistently strong combined ratio throughout the cycle, despite experiencing catastrophe events.
The rating agency said that Patria, Ocean Re, and ASR Re maintain very strong capital positions, with Prism scores in the ‘Extremely Strong’ category.
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Fitch noted that Eureka Re also scores ‘Extremely Strong’, but its high gross leverage, due to reliance on retrocession, weighs on the assessment of capitalisation.
At the same time, Oman Re’s ‘Strong’ score reflects the risk of its sovereign-related investments.
Fitch suggested that all firms in the peer group rely on robust retrocession or reinsurance programs to manage large and catastrophic risks, with net probable maximum loss-to-capital ratios remaining well contained.
The rating agency added, “Despite being significant players within their respective regional markets, all five reinsurers operate at significantly smaller scales compared to global peers.
“This weighs on Fitch Rating’s assessment of their company profiles and ultimately constrains their ratings.
“The reinsurers maintain diversified business models with varying degrees of risk-bearing and fee-based captive business.”
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