12 September 2014 Insurance

Does size really matter?

As ratings become ever more important to the reinsurance industry, analytical firm Litmus Analysis examines the ratings of the world’s 40 biggest reinsurance groups using a unique methodology to establish their average ratings. Stuart Shipperlee, partner at Litmus, describes some of the chart’s findings.

Standard & Poor’s (S&P) Global Reinsurance Highlights report published each year in September has become something of an institution in its 20-year history, even if the provenance of the name is long forgotten (it was originally the ‘highlights’ from a larger report that proved prohibitively expensive to mail out in a pre-digital world).

In its Top 40 group ranking table the agency uses net reinsurance premiums as the key metric. However, despite the purely reinsurance premium volume focus, a quick glance at the list highlights an often unnoticed aspect of the reinsurance market: a lot of capacity comes from large primary groups (or those with major primary operations). Of course, a premium number alone doesn’t tell us about the ‘nature’ of that capacity. Nonetheless in absolute terms it represents a significant part of the market.

In our table for Intelligent Insurer we have used a different ranking basis: the average rating of the ratings, calculated via the ‘Litmus Composite Score’ methodology, which the core carriers of each group receive from the four main agencies—AM Best, Fitch, Moody’s and S&P.

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