27 November 2013 News

More US risk to reach the private sector

Arch Re’s recent $77.4 million cover for Freddie Mac – the Federal Home Loan Mortgage Corporation in the US – could encourage more US risks to enter the private sector. That is the opinion of Franklin Nutter, president of the Reinsurance Association of America (RAA).

“Government at the state and Federal level are under fiscal pressures and therefore are evaluating privatisation options,” he said. “The Arch transaction is a good example of the creative aspects of insurers to assist government in managing risk.”

The policy provided by Arch Re, which was announced earlier in November, will cover credit losses for a portion of the credit risk associated with a pool of single-family loans funded in the third quarter of 2012.

While some are sceptical of pushing risks into the private sector, Nutter believes that the outcome would be positive for the industry.

“Reinsurers routinely look for opportunities to diversify their risk – it’s part of enterprise risk management. The privatisation of government programmes, generally or in part, creates new business opportunities for reinsurers.”

The Terrorism Risk Insurance Act (TRIA) – an act created by the US government to provide a shared public and private compensation for insured losses resulting from acts of terrorism – has recently been in the news as talks surrounding the private sector’s increased involvement have taken place.

“TRIA is currently under review by the US Congress as part of its 2014 re-authorisation,” explains Nutter. “Leadership on the Committee of jurisdiction have indicated that they are seeking a greater private sector role. Under the National Flood Insurance Program a “privatisation” study is being under taken to assess such options. Further reform of the government sponsored enterprises such as Freddie Mac is a high priority for the Obama Administration as well as the Congress but has been slow to coalesce.”

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk