Reinsurers take advantage of mild hurricane season to boost capital

Global reinsurers in took advantage of relatively mild weather conditions in 2006 to stabilize their balance sheets after a particularly tough 2005 season, a report by Standard & Poor’s observes.
The report says reinsurers for the most part took steps to strengthen operational and underwriting results. In addition, they improved their capitalization and financial flexibility through the use of alternative financial instruments.
“Although 2006 was one of the tamest years for weather-related catastrophes in recent years, global reinsurers’ high 2005 loss experience drove them to take aggressive steps to mitigate future catastrophe-borne loss experience,” according to the article, entitled Global Reinsurers Reassess Catastrophe Exposure, Experience, and Expectations.
The article details the steps reinsurers took on results through 2006 Q3.
“2005 was a sore reminder of the extent to which global reinsurers and modeling firms had previously underestimated the effects of volatility on financial strength,” said Standard & Poor’s credit analyst Laline Carvalho in a press release announcing the report. “Our current ratings on global reinsurers presume that these changes in operational focus should lead to more prudent underwriting decisions and reduce the probability of chronic underpricing and some of the earnings volatility as well.”