Cedants centralising reinsurance purchases: S&P
Cedants are continuing to enjoy favourable conditions in North America while centralising their reinsurance purchases.
This is the finding of panellists at the 2015 Bermuda Reinsurance Conference, sponsored by Standard & Poor’s and PwC Bermuda.
According to the panellists, the purchase of reinsurance protection has steadily moved into a centralised function at the holding company level.
When compared with previously, where distinct business units would buy reinsurance, this allows for cost savings, portfolio optimization, improved views of risk capital, and capital allocations.
"To take advantage of that diversification and that data we have, it only makes sense to look at our business from a more global perspective," said Samir Shah, head of insurance capital markets at American International Group.
S&P explained that favourable conditions in North America, where surpluses have steadily increased while reserves remain adequate, has allowed insurers to retain risks and the associated profits on balance sheets.
Other behind-the-scenes changes have been just as important, said James Slaughter, senior vice president of global reinsurance strategy at Liberty Mutual.
"The first is that insurance companies got good at analytics and data," he said. "The cedant has become as smart as, or in some cases, smarter than the reinsurer. Notice I didn't say smarter than all reinsurers--just some. I don't want to offend everyone."
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