Economic turmoil presents opportunity for reinsurers to regain market share

The manner in which cedants select reinsurance partners has shifted as the demand for reinsurance capacity increases, according to a Willis Re report.
In 1st View; Capital Rules, Willis Re examines global trends that emerged during the Jan. 1, 2009 renewal season.
The turmoil in the global capital markets during the second half of 2008 created capital pressures for primary insurers; as a result, the gradual decline in demand for reinsurance over the preceding few years has started to abate, the report says.
“In step with this absolute increase in demand for reinsurance capacity, we are also observing a shift in the manner by which cedants select reinsurance partners, as the recent events in global financial markets have prompted a fundamental reassessment of credit risk,” the report says.
“With third party credit ratings no longer sacrosanct, insurers are seeking to use portfolio diversification to mitigate their counterparty exposure. One immediate impact of this is the syndication of risk, which in turn is affording opportunities for reinsurers to obtain shares on programs previously dominated by a limited number of large players.”
Nevertheless, the primary market has yet to realize full-scale price increases flowing from the deepening global recession, falling yield curves, rising loss ratios and expected increases in reinsurance pricing levels, it adds.
“Thus, in order to regain their previous [market share] positions, reinsurers will need to balance attempts to realize portfolio management objectives with the real economic constraints faced by their insurer customers.”