Amlin saves £70m by slashing reinsurance spend
Amlin has said it expects to save £70 million annually as a result of restructuring its reinsurance buying programme.
The re/insurer said that by using more sophisticated modelling, it will internalise a number of reinsurance programmes resulting in an increase in its profitability with only a modest increase in extreme tail risk.
Driven partly by regulatory requirements and the way capital charges are likely to be applied under Solvency II and partly by the development of ever more advanced risk modelling techniques, many larger insurers have adopted a similar philosophy in recent years leading to a shift in the relationship between insurers and reinsurers.
Amlin said its reinsurance expenditure in the first quarter of 2014 was £226.8 million, representing 17.8 percent of gross written premiums compared with a spend of £276.7 million in the same period in 2013 representing 22.8 percent of gross written premiums.
It said the reduction reflects the closure of Special Purpose Syndicate 6106, which accounted for £17.1 million of reinsurance expenditure in the prior period and £35.9 million for the 2013 full calendar year.
The company said it has also improved its retrocessional purchase, benefitting from lower rates and improved cover available on attractive terms. In addition, its outwards reinsurance spend for insurance classes generally has been reduced.
“With the assistance of more sophisticated modelling, we have taken the decision to internalise a proportion of a number of programmes. Given the diversifying nature of many of our insurance classes, this has the effect of increasing mean expected profitability whilst only modestly increasing extreme tail risk. Overall a full year saving of approximately £70 million in reinsurance expenditure is expected,” the company said.
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