Canadian Underwriter

Guy Carpenter study links reinsurance and capital management

July 25, 2001   by Canadian Underwriter

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Reinsurance will play an key role in capital management for insurers, says a new study from international reinsurance intermediary Guy Carpenter. The study, based on a seminar on capital management, notes that insurance companies need to manage capital more effectively for greater profitability, and that reinsurance will be a part of this strategy.
In “Managing Capital and Expectations through Effective Risk Management”, Guy Carpenter relies on the insights of several experts, discussing the relationship between capital management and risk management. Among the theories presented are that internal cash flow is key to a company’s ability to invest and how insurance and reinsurance can stabilize cash flow, that insurer solvency ratings and influenced by the ability to manage capital, and how industry earnings will be more volatile and raise the cost of capital in the future.
“Capital management and reinsurance traditionally have not been considerd in the same context, but there are now compelling reasons for doing so,” says Guy Carpenter chairman and CEO Salvatore Zaffino. “Reinsurance can be a powerful risk management tool that helps create shareholder value through sound risk management.”

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