China Re to expand role in agri and catastrophe coverage

The group is also likely to continue its international expansion.

China Reinsurance (Group) and its subsidiaries are expected to maintain its momentum in their life reinsurance business over the next two years, post-contraction on savings-type policies in preparation for Hong Kong regulatory updates.

However, China Re Group is expected to continue playing a significant role in agricultural and catastrophe risk assessment and reinsurance coverage in China, S&P Global Ratings said.

The group is also likely to continue its international expansion through its overseas operation, Chaucer Group.

Under S&P Global Ratings’ revised capital model criteria, China Re Group's capital and earnings remain satisfactory, with an improved capital buffer due to better recognition of diversification benefits and increased total adjusted capital (TAC) from the removal of haircuts to value-in-force. 

However, this is offset by increased risk differentiation in interest-rate risk, non-life premium and reserve risk capital requirements, and recalibration of risk charges at higher confidence levels.

The stable outlook reflects the high likelihood of extraordinary support from the Chinese government and China Re Group's leading domestic position with an expanding international presence. 

China Re Group's improved capital buffer should help it navigate challenges from capital market volatility and extreme weather events. However, its expansion and holding of high-risk assets could consume capital. 

The group is expected to hold capital exceeding S&P's 99.50% confidence level in its risk-based capital model over 2024-2026.

Volatile underwriting results and dependence on investment returns due to low interest rates in China have led to earnings volatility, exacerbated by asset valuation losses and impairments, such as the group's 6.5% equity holding in China Great Wall Asset Management. 

The group’s combined ratio is estimated to be 99%-101% over the next two years, compared to a five-year historical average of 102.1%.

Despite recent large losses from events like the Baltimore bridge collapse and earthquakes in Taiwan and Japan, the impact on China Re Group is limited. 

In 2023, the group's domestic and overseas property and casualty (P&C) reinsurance businesses reported combined ratios of 99.5% and 85.7%, respectively, improving from 99.8% and 94.0% in 2022. 

The domestic primary P&C insurance business also improved its combined ratio to 100.8% in 2023 from 103.1% in 2022.

China Re Group's domestic P/C reinsurance segment experienced a 7% year-on-year decline in premiums in the first quarter, primarily due to retrocession from China Agriculture Reinsurance, potentially contributing to topline volatility.