14 POLICY Special edition 2023 distortion in the comprehension of the outcomes is created. When it comes to the outcome in the balance, the reinsurers also don’t enjoy (or suffer like in 2022) the condition in the capital market, and therefore, in the current year they enjoyed the changes in the interest curve, which reduced the insurance liabilities, and they transferred from a loss of 794.4 million NIS in 2021 to a profit of 561.1 million NIS in 2022- an improvement of 1.3 billion NIS. The results of 2021 and 2022 were respectively (negatively and positively) affected by the changes in the interest curve, but it seems that in 2022 there was also an underwriting profit in the sub-field of professional liability, which is undergoing a rise both in the premiums and in the underwriting profitability. Since the 6 large companies constitute most of this field, it seems that except for Migdal (a loss of 58.1 million NIS) the rest of the large companies presented a profit and considerable improvement compared to 2021 (in the Phoenix the reinsurers have a profit but it is less than that of 2021). In the companies Clal (that moved from a loss of 537.3 million NIS in 2021 that mainly derives from a facultative insurance to a profit of 191.7 million NIS in 2022), Ayalon (that moved from a loss of 94.5 million NIS in 2021 to a profit of 188.2 million NIS in 2022) and Harel (that moved from a loss of 151 million NIS in 2021 to a profit of 115 million NIS), the positive change was significant. The result of the reinsurers in Menorah (a profit of 166 million NIS) is notable since it is an exception that the reinsurers presented a (balance) profit two years in a row, while improving their condition (63.4 million NIS). We can notice in the other (small and medium-sized) companies the loss of Hachahara’s reinsurers. Property and Other Insurances The field of property and other insurances is the largest field in the reinsurances, and about 70% of its production transfers to it. Therefore, the effect of the reinsurers on the retention production and on the results is the most significant. In 2022 4.404 billion NIS out of the 6.262 billion NIS were transferred to the reinsurers -70.3% (while in 2021 3.873 billion NIS were transferred out of 5.577 billion NIS- 69.4%)/ In principle, the results of the reinsurers don’t reflect a true picture, mainly because of the premium that is related to the earthquake, which considerably contributes to the distortion of the outcomes (a premium without any claims), and therefore you need to examine the field when you neutralize these premiums. This field has many reinsurances and all the large companies, which constitute about 80% of the production in this field, showed in 2022 (and also in 2021) a nice profit of more than 1 billion NIS. In 2022 three companies, which aren’t amongst the large companies, unusually reported that the reinsurers in the field of property and other insurances had a loss (Bituach Haklai - 13.5 million NIS, Shlomo- 15.5 million NIS, Hachshara- 41.3 million NIS). Summary The reinsurers’ results in the different fields of activity divide between proportional contracts, unproportional contracts and facultative insurances. Therefore, the reinsurers’ profit or loss that is recorded in the companies’ balances may be different between the different types of contract and different companies also because of a difference in the terms and commissions. As a result, the reinsurers’ outcome that is written in the companies’ balances is mainly an indication about the complex and you cannot deduce from the balance the results of a specific reinsurer in a specific field or sub-field. However, you can connect the companies’ retention results with results of the reinsurers in order to understand the conduct of a specific field. For example: if the companies presented a retention loss of 1.5 billion NIS in the comprehensive motor insurance field and a loss of about half a billion NIS was presented in the companies’ outcomes in the balance, then you can understand that the motor insurance field presented in 2022 a loss of about 2 billion NIS and the reinsurers only reduced the loss rate for the Israeli insurers. In the fields of liability insurances and property and other insurances there are many distortions in the results, which derive from facultative insurances (lability insurances and property and other insurances) and from the manner the earthquake profits (property and other insurances) are recorded. Therefore, the results in the fields of compulsory and comprehensive motor insurances can provide over time an indication about the reinsurers’ satisfaction. Since the large changes in the compulsory motor insurance started in 2016 following the entrance of the best practice, we noticed a rising rate of the entrance of reinsurers into proportional insurances in considerable participation percentages. Starting from 2016 the portion of the reinsurers’ losses in the compulsory motor insurances reached more than 2.5 billion NIS (including an increase of 1 billion NIS in 2021), and it seems that starting from 2022 there is a change of approach, which includes an improvement of positions in the participation rate, in the rate of the commissions and in other terms while transferring to unproportional insurances. We are expected to see similar trends also in the field of the comprehensive motor insurance (where 10% of its production is transferred to reinsurers) because despite the good years the Israeli insurers had (between 2017 and 2020) the reinsurers aggravatedly had losses in those years, which intensified in 2021 and even more in 2022. Continued from previous page The Reinsurers’ Results in the Compulsory Motor Insurance and Liability Insurance have considerably improved in 2022 compared to 2021 and at the same time there was an Aggravation in the Comprehensive Motor Insurance 2022 Elementary Sector Result Analysis
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