Results of the 2021 SOA Reinsurance Section’s Life Reinsurance Survey
By Lingxiao Chen and Anthony Ferraro
Reinsurance News, August 2022
In 2021, individual life recurring new business volumes increased by 2 percent in the U.S. and 13 percent in Canada.
Group recurring in-force premiums decreased by 3 percent in the U.S. and 18 percent in Canada over the same time period.
Table 1 summarizes the most recent results from the 2021 SOA Reinsurance Section’s Life Reinsurance Survey.
Table 1
Reinsurance Landscape
1 % change from $0.198 million to $0.085 million.
2 % change from $0.036 million to $0.037 million.
About the Survey
The SOA Reinsurance Section’s Life Reinsurance Survey is an annual survey that exhibits individual and group life data from U.S. and Canadian life reinsurers. Survey results are based on financial information self-reported by reinsurance entities and include new business production and in-force figures, with reinsurance broken into the following categories:
- Recurring reinsurance: Conventional reinsurance covering an insurance policy with an issue date in the year in which it was reinsured. For purposes of this survey, this refers to an insurance policy issued and reinsured in 2021.
- Portfolio reinsurance: Reinsurance covering an insurance policy with an issue date in a year prior to the year in which it was reinsured or financial reinsurance. One example of portfolio reinsurance would be a group of policies issued during the period 2005–2006 but reinsured in 2021.
- Retrocession reinsurance: Reinsurance not directly written by the ceding company. Since the business usually comes from a reinsurer, this can be thought of as “reinsurance of reinsurance.”
Individual life results are based on net amount at risk, while the group life results are based on premium.
The figures are quoted in the currency of origin with U.S. business provided in USD and Canadian business provided in CAD.
While we reach out to all of the professional life reinsurers in North America, please note that there may be companies that did not respond to the survey and therefore are not included. For the third year, RMA has been included in the study. RMA represents Korean Re, Toa Re and other reinsurers.
The remainder of this article discusses this year’s results in more detail and looks at overall life reinsurance trends. We will begin by looking at the results for the U.S. individual life market.
United States—Individual Life
Recurring New Business
Recurring individual life new business recorded an increase in production for the sixth year in a row after a prolonged period of decreases. Compared to 2020, U.S. recurring new business increased by over 2 percent from $598 billion to $612 billion in 2021. Contributing factors for the increase include:
- Strong growth in the retail individual life sales (6 percent by face amount),[1] while the overall cession rates on new business saw little change from an estimated 33 percent to 32 percent.
- Continued growth in accelerated underwriting programs and expansion of face amounts on these programs. These factors elicit support from reinsurers in program development and risk sharing.
Figure 1 shows the annual percentage change in U.S. recurring new business production over the last 10 years, illustrating sustained upward trends over the past six years. Since 2016, individual life recurring new business has grown at a compound annual growth rate (CAGR) of 7 percent.
Figure 1
U.S. Percentage Change in Recurring New Business 2012–2021
In 2021, 83 percent of recurring new business production was yearly renewable term (YRT) and 17 percent was coinsurance, in line with prior years.
To estimate an overall cession rate for the life reinsurance industry, we compare new direct life sales to new recurring reinsurance production. According to LIMRA, individual life insurance sales increased 6 percent in 2021 based on face amount. Taking these results together with the life reinsurance production levels results in an estimated cession rate for the industry of 32 percent for 2021. As seen in Figure 2, the estimated cession rate increased steadily from 25 percent in 2015 to 30 percent in 2017, stabilized for the next few years until an increase in 2020, followed by a slight drop to 32 percent in 2021.
Figure 2
U.S. Individual Life Insurance Sales (Face Amount)
The top five companies by market share in the U.S. reinsurance market represent 83 percent of 2021 market share as compared to 82 percent last year (see Table 2). Swiss Re led all reinsurers in recurring individual life new business. In 2021, Swiss Re reported $136 billion of recurring business, a 7 percent increase from 2020, resulting in a 22 percent market share. The next three largest reinsurers by market share are RGA (19 percent, $118 billion recurring), Munich Re (17 percent, $103 billion), and SCOR (17 percent, $102 billion). Six reinsurers reported increases in recurring new business volumes versus 2020.
Table 2
U.S. Recurring Individual Life Volume ($ billions USD)
Portfolio New Business
For survey purposes, portfolio reinsurance includes in-force blocks of business and financial reinsurance transactions. As a result, there are often large fluctuations from year to year in reported portfolio results, and 2021 was no exception. New portfolio business increased from $113 billion in 2020 to $404 billion in 2021. Swiss Re accounts for $249 billion (62 percent) of the 2021 portfolio new business followed by Munich Re at $82 billion (20 percent) and SCOR with $54 billion (13 percent). There are two other companies reporting portfolio new business in 2021, accounting for $19 billion (5 percent).
Figure 3 illustrates the portfolio new business written over the last 10 years, highlighting the volatility of the results. As reported previously, the large spike in 2013 was the result of mergers and acquisitions within the life reinsurance industry, and 2016 featured a large in-force transaction. This year’s increase was also driven by various in-force block transactions.
Figure 3
U.S. Portfolio Business Trend
Retrocession
Retrocession new business volumes are considerably smaller than recurring new business and portfolio new business volumes. From 2005 to 2015, retrocession production in the U.S. had been on a downswing, dropping from $43 billion in 2005 to $5 billion in 2015. Following an uptick in 2016 to $8 billion, retrocession new business has remained flat through 2020, with a decrease to $6 billion in 2021. The primary retrocessionaires in 2021 (unchanged from 2020) were Berkshire Hathaway Group, Equitable and Pacific Life.
Next, we will examine the results for the Canadian individual life market.
CANADA—INDIVIDUAL LIFE
Recurring New Business
Recurring individual life new business in Canada increased for the seventh consecutive year. Reported recurring new business totaled $215 billion in 2021 which is a 13.2 percent increase over 2020. Figure 4 shows the annual percentage change in recurring new business over the last 10 years. Since 2014, recurring new business in Canada has grown at a 6 percent CAGR after a period of minimal growth and declines.
Figure 4
Canadian Percentage Change in Recurring New Business 2011–2021
According to LIMRA, Canadian direct individual life sales, on a face amount basis, increased by 9 percent in 2021 compared to 2020.[2] This growth was driven by Universal Life sales, which makes up 13 percent of face amounts and increased 45 percent on a face amount basis in 2021. The 2021 premium also increased by 25 percent. The increase is driven by Whole Life policies which saw a 35 percent increase in annualized premium and makes up 64 percent of total premiums.
The estimated cession rate for 2021, which is based on a comparison of direct life sales to recurring reinsurance volumes, increased slightly from 67 percent to 69 percent. Canadian cession rates continue to be much higher than those in the U.S.
Figure 5
Canadian Individual Life Insurance Sales (Face Amount)
In terms of market share, the top three life reinsurers in the Canadian market remain the same as 2020 which are RGA, Munich Re, and Partner Re. In 2021, they collectively represent 71 percent market share. RGA topped recurring new business writers reporting $59 billion (24 percent increase from 2020). Munich Re followed with $50 billion (2 percent increase from 2020) and Partner Re rounded out the top three with a reported $43 billion (21 percent increase from 2020).
Of the eight reinsurers reporting material volumes to the survey, seven reported increases in recurring new business volumes from 2020 to 2021. Table 3 summarizes assumed volumes and market share by reinsurer and compares 2021 and 2020 results.
Table 3
Canada Recurring Individual Life Volume ($ billions CAD)
Portfolio New Business
Berkshire Hathaway reported material portfolio new business for 2021, accounting for $2.4 billion of the $2.5 billion reported.
Retrocession
Retrocession business in Canada is considerably smaller than recurring new business and portfolio business. Canadian retrocessionaires were Pacific Life and Berkshire Hathaway. Pacific Life led the retrocessionaires with $3.0 billion, followed by Berkshire Hathaway ($2.1 billion). Overall, the retrocession market in Canada increased from $4.5 billion in 2020 to $5.2 billion in 2021.
The next section discusses the group insurance results for the U.S.
United States—Group Life
U.S. group life reinsurers reported $9.1 billion of in-force premium in 2021, up 10 percent from the $8.3 billion reported in 2020. Of this, recurring business accounted for $0.8 billion and portfolio business represented $8.3 billion.
Traditional (i.e., excluding portfolio and retrocession) in-force group premiums in the U.S. decreased by 3 percent to $773 million in 2021 following an increase in premium in 2020. Group in-force premiums grew 42 percent from $546 million in 2012 to $773 million in 2021 (see Figure 6), a CAGR of 4 percent.
Figure 6
U.S. In-force Traditional Group Premiums
As shown in Table 4, the top three reinsurers in the U.S. group life reinsurance market for traditional business are Swiss Re, Munich Re and RGA. Collectively, these three companies account for 79 percent of the market. Swiss Re, Munich Re and RGA reported changes in 2021 traditional premium of -13 percent, 9 percent and -13 percent, respectively.
Table 4
U.S. Traditional In-force Group Premiums ($ millions USD)
In-force group portfolio premium totaled $8.3 billion in 2021, up 11 percent from last year’s $7.5 billion. Portfolio premium originates from two reinsurers. Canada Life Re reported $7.8 billion in portfolio premium in 2021, up from $5.6 billion in 2020. Munich Re reported $0.5 billion in 2021 versus $1.9 billion reported in 2020.
Next, we look at results for the group life insurance market in Canada.
Canada—Group Life
Group life reinsurers in Canada reported $125 million of in-force premium in 2021. For 2021, in-force group premium decreased by 18 percent as compared to 2020. Similar to in the U.S., the group market in Canada is dominated by Munich Re, RGA and Swiss Re. These three account for 94 percent of the market share (see Table 5). Of the five reinsurers reporting material volume, three reported decreases in traditional in-force premium versus 2020.
Table 5
Canada Traditional In-force Group Premiums ($ millions CAD)
Looking Ahead
Life reinsurance financials in 2022 and beyond will be influenced by a range of factors:
- Continued evolution of sales trends due to COVID-19, the emergence of new COVID-19 strains, and the impact of long COVID as it becomes an endemic.
- Ongoing economic challenges such as high inflation and interest-rate volatility, and uncertainty with energy and supply chain.
- The continued expansion of accelerated underwriting programs and face amounts.
- Continued aging of the population and changing consumer preferences.
- Increased competition and insurers/reinsurers ability to address their technology burdens and develop innovative solutions.
- Carrier efforts to navigate evolving regulatory, legal, and accounting landscapes, such as adopting IFRS 17 and GAAP LDTI.
- Increased M&A activity in the individual life and annuity space.
Life reinsurers are equipped to support direct carriers in addressing the challenges posed by these factors. Reinsurers’ expertise goes beyond traditional mortality and risk selection and includes financial reinsurance as well as value-added expertise in areas such as program development, underwriting operations, predictive analytics/risk selection, post-issue monitoring and risk management. This expertise and support can be invaluable to direct writers as many look to expand their offerings, improve outreach to consumers and enhance controls.
Reinsurance remains a valuable tool for efficient capital and volatility management. Financial reinsurance structures and reinsurance of in-force blocks, either for non-core businesses or as a means to manage profitability, continue to be attractive levers for direct writers.
Thank you to all the reinsurers that participated in this year’s survey. Complete results are available at https://www.munichre.com/us-life/en/perspectives/life-reinsurance-survey/survey-results-2022.html.
Note that Munich Re prepared this survey on behalf of the Society of Actuaries Reinsurance Section as a service to section members. The contributing companies provide the data in response to the survey. The data is not audited, and Munich Re, the Society of Actuaries and the Reinsurance Section take no responsibility for the accuracy of the figures.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.
Anthony Ferraro, FSA, MAAA, is senior vice president, Individual Life Reinsurance at Munich Re. He can be reached at aferraro@munichre.com.
Lingxiao Chen, FSA, MAAA, is associate actuary, Individual Life Reinsurance at Munich Re. She can be reached at lchen@munichre.com.