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A Global Conversation
Reinsurance Rundown

Insurance industry experts discuss the latest hot topics and challenges facing the reinsurance market with AMBestTV.
  • August 2019
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Michael Adams

“The top global reinsurers are struggling to grow their top line. This could be partially attributed to direct carriers struggling to grow their top line. These larger carriers are operating in the mature U.S. and European markets, and it’s difficult to grow at above average rates in a saturated marketplace. What we’re seeing is these carriers moving to emerging markets where we’re seeing pretty strong growth rates, particularly Asia Pacific, and China really has seen the strongest growth.

A lot of that Chinese growth is coming from Chinese domicile companies. With the explosion of the middle class in China expected to continue, we think that there’s a lot of room there for global insurers to grow there which will help the global reinsurers. We’re also seeing growth in the longevity space. Historically, the U.K. has been the place where we’ve seen the most growth for longevity and longevity transactions. However, we’re seeing more transactions now in Europe and in North America. We do expect that trend to also continue as companies want to lay off their pension risks. If interest rates behave, we believe that trend will continue.”

Michael Adams
Senior Financial Analyst
AM Best


Edward Zonenberg

“Beginning in mid-year 2019, we’re going to compile a list of companies that are exposed to terrorism. Companies that have a material terrorism exposure and a significant reliance on the Terrorism Risk Insurance Program Reauthorization Act will be asked to come up with a plan to mitigate those risks, mitigate that exposure.

Though a lot of companies do rely on private reinsurers to cover terrorism risk, there’s also the issue of whether that availability will be as present as it is currently. Insurers that cannot come up with the plan to address these issues will be notified of a potential rating action, either a downgrade or an outlook, but they’ll be notified ahead of time.”

Edward Zonenberg
Senior Financial Analyst
AM Best


Ted Hodgkinson

“This [regulators implementing preferential treatment for reinsurance business] could be an exciting opportunity for Hong Kong. Chinese insurers continue to enjoy double-digit domestic market growth. They’re also looking to expand overseas. To support this growth insurers require more reinsurance support. In 2016 a new risk-oriented solvency system was introduced under which there was a high capital charge for overseas versus domestic reinsurers. Now, with this preferred treatment, approved Hong Kong domiciled reinsurers will be subject to the same capital charges as domestic reinsurers.”

Ted Hodgkinson
Head of Corporate Risk & Broking, Hong Kong, Macau
Willis Towers Watson


Jonathan Conway

“U.S. inland marine actually has not really been subject to poor loss experiences. On the contrary, it’s been very profitable. We’ve heard this week at the seminar that typically [inland marine insurers] have combined ratios 8 to 10 points lower than the P/C industry, generally.

That’s attractive to a lot of reinsurance. The market has evolved with a lot more capacity for reinsurance. We see a product development. The ocean marine and the international construction markets are now supplying long-term policy products.

We’re seeing a combination of risk and cat covers, which is a nice evolution for the local market.

The market has evolved with a plentiful supply of capacity, soft pricing and, particularly on the quota shares, you’re seeing very high commission levels now on the quote share treaties, mid-to-high 30% commissions which, in the property/casualty world, is a very significant number.”

Jonathan Conway
Head of Construction & Engineering
Aon Global Re Specialty


Fred Karlinsky

“You’re going to see an expansion of the use of reinsurance. In Florida, we really have been ground zero for catastrophes. Our marketplace here is very unique, but it’s also, believe it or not, become a mature marketplace where you have a certain amount of capital put up by the primary insurers, and then the worldwide reinsurance market covers the rest.”

Fred Karlinsky
Attorney
Greenberg Traurig


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