North America’s 25 biggest cedants
The client at the PCI conference is, as ever, king—and with this in mind and with the help of SNL Financial, a product of S&P Global Market Intelligence, we decided to take a look at the biggest buyers of reinsurance in North America.
As the North American re/insurance industry convenes at PCI for the annual industry convention, as well as looking forward to hearing George W Bush speak, many players will also be embroiled in negotiations around their year-end renewals.
Measuring the biggest buyers of reinsurance in North America is no simple task, such is the increasing complexity of the industry. Insurers are also reinsurers—and vice versa—these days and a plethora of risk transfer mechanisms exist from the simple yet innovative to the downright opaque, all of which can skew the way companies report their ceded premiums.
On top of this, a few of these entities are actually subsidiaries of larger groups domiciled in other parts of the world, such as Bermuda. As such, an element of their ceded premium ratio may merely reflect business being moved or reinsured internally.
Other vagaries may also underpin this data that mean the ceded premiums figure does not necessarily reflect conventional reinsurance spend. Quite often fronted business (ceded 100 percent) will be included as well. This particularly applies to some of the big primary insurance groups.
Equally, switching from non-proportional to proportional cover, or vice versa, can have a significant influence on the reported numbers.
The following tables, however, give a pretty good indication of which groups in North America are buying the most reinsurance—as long as you bear these caveats in mind. And to the discerning reinsurer or reinsurance broker, they will make interesting reading.
One trend that is identifiable is that the ceded ratio of many groups has increased year on year, which ties in with what many brokers and rating agencies have been saying in the past year.
Out of the 25 insurers here, 14 have increased their ceded ratio between 2014 and 2015. The majority remained stable; very few experienced a big drop-off.
It is also notable that some companies have very high ceded ratios. While this number may well be skewed by fronting arrangements or other risk transfer instruments or moving business back to a parent companies based elsewhere, for some of these companies it may also be attributed to their business model.
Chubb, for instance, which has a ceded ratio of 25 percent, announced a joint venture with fund manager BlackRock in which it formed its own fund last year, called ABR Re, to manage its reinsurance needs.
ABR Re raised $800 million of capital. ACE is to be the sole source of reinsurance risks ceded to ABR Re, and BlackRock will be ABR Re’s exclusive investment management service provider.
ACE described the venture as a complement to the traditional markets but the point is also that while it represents an innovative way for ACE to manage its risk, it would presumably also encourage it to cede more risk, thus having a higher ceded ratio.
The very biggest buyers overall, however, will be no surprise. The likes of AIG, Chubb, Liberty and CNA are the continent’s biggest insurers with a lot of risk coming in through their front doors. While they may have restructured their reinsurance arrangements in recent years, they too remain reliant on their reinsurance partners—while also being the industry’s biggest customers.
