Reinsurance

Reinsurance purchase delayed by Japanese earthquake

Turmoil in the reinsurance market means that it will be a little longer before the AIUA, Alabama's coastal insurer of last resort, will figure out how much it will pay this year to pass off some of its risk.

Reinsurance is the biggest part of the pool's budget, and has been a factor driving rate increases in recent years. Last year, the pool spent more than $20 million, or more than 60 percent of its budget, to buy coverage protecting its member insurers from losses in a slot between $100 million and $435 million.

Read Mobile Register reporter Jeff Amy's complete article

Posted 4/9/2011

Reinsurance Rates Fall Despite 2010 Disasters

WSJ article 1/4/2011 by ERIK HOLM

NEW YORK—Despite a flurry of natural disasters in the first half of 2010, reinsurance companies—which sell backup protection to insurers—charged about 5% to 10% less as they negotiated new catastrophe coverage that kicked in on Jan. 1, according to brokers who arrange the coverage.

The roster of last year's catastrophes included earthquakes in Haiti and Chile, the sinking of the Deepwater Horizon oil rig in the Gulf of Mexico, and a massive windstorm in Europe. Catastrophes are often the trigger for reinsurance price increases.

But reports from the leading reinsurance brokers point to the absence of hurricanes hitting the U.S in 2010 as one reason for the pricing declines, since the June-to-November hurricane season in the Atlantic Ocean usually means the second half of the year is more costly for the insurance industry.  The majority of primary insurers back in their protection against large losses for the coming year by Jan. 1.

Posted 1/5/2011

Reinsurance does not raise policy prices

 From Ratemaking Applications of Catastrophe Models, a presentation by Bob Fox, ACAS, MAAA Managing Director, Aon Benfield

• We think that reinsurance purchases increase insurance premiums only because our profit provisions don’t reflect the cat risk that the reinsurance replaced

•  A rate incorporating the net cost of reinsurance and a provision for retained catastrophe risk will always be less than a rate adequate to support cat risk without reinsurance

See complete presentation

 Posted 8/5/2015

Sales of Catastophe Bonds Soaring

Article in WSJ 10/18/2013

Click to see article

Posted 10/21/2013

HEDGE FUNDS ENTER REINSURANCE MARKET

From 10/27/2011 Reuters report by Svea Herbst-Bayliss

Steven A. Cohen, who built one of the world's biggest and most successful hedge funds, is branching out and plans to set up his own reinsurance firm, two people familiar with the matter said.

For years, hedge fund managers have been known as big risk takers, but more recently a growing number have also move into underwriting risk.

"We haven't had a lot of new reinsurers launched in the last five years, but that is clearly changing," said Barile, who runs Andrew Barile Consulting Corp Inc.

For hedge funds, this may be a savvy way to raise new money during tough times. Not only are there more hedge funds competing for capital, but investors are becoming stingier, especially now that many hedge funds are nursing heavy losses, industry experts say.

Reinsurance essentially acts as a safety valve for insurance companies in that an insurer pays a reinsurer to cover part of its losses between certain thresholds.  The new reinsurer will concentrate on property, where hurricanes and other disasters can cause substantial damage, and on casualty, where the scope of losses may be lower, but they occur more frequently in medical malpractice or workers' compensation claims.

Posted 10/27/2011

Insurance leaders call for federal reinsurance aid

Read article in MPR 4/9/2010

 

This page last updated 11/6/2015