Credit & political risk to grow
Driven by an appreciation of the benefits of diversification and a search for healthier rates, many insurers have shown a growing commitment to the credit and political risk space in recent years, creating more choice for clients as a result. This has been widely supported by reinsurers.
That is the analysis of Sian Aspinall, managing director of BPL Global, a broker that specialises in this market, who says the sector holds a growing attraction for insurers as they seek to find lines of business removed from the intense pricing pressure faced by other parts of the market.
“It is a countercyclical market for them, not driven by the same forces that inform rates in other lines of business such as large catastrophe losses,” Aspinall said.
“That is not to say rates are not under pressure, but certainly not to the same extent. It also offers diversification, something that is increasingly valued by insurers since Solvency II came into force.”
She said most reinsurers operate in the market on a quota share basis, following the requirements of cedants, which have changed their own offering since the financial crisis to offer a much more comprehensive suite of products. They have largely been supported by reinsurers in this but, she added, some reinsurers have also started to compete on a direct basis now.
“For us, it is a good thing, as it creates more choice for our clients, but I could imagine that greater competition and the impact on pricing doesn’t please everyone,” Aspinall said.
She added that the credit and political risk insurance market came of age in many ways after the financial crisis, when insurers paid claims quickly and illustrated the sector’s value to customers in a way that had not been seen before. This has led to more innovation and growth in the market.
“There is also scope for banks to obtain capital relief by using insurance, making it comparable to other hedging instruments,” she added.
Get all the latest re/insurance industry news with our daily newsletter - sign up here.
More of today's news from Baden-Baden
More cedants seek reinsurance to curb earnings volatility: SCOR
Where is consolidation taking the sector, asks GC panel
NewRe seeks non-Europe P&C growth
Swiss Re prepares for future growth markets in Europe
Mapfre Re to expand range & remit
Use of blockchain may overcome trust issues
Give MGA owners skin in the game: Citadel
Axis Re: growth in Asia & Lloyd’s
Europe a challenging environment for small reinsurers
UnipolRe’s new capital management tool to empower buyers
Ed embraces insurtech to put specialist products on line
Euler Hermes anticipates a stable renewal
Reinsurance is now an execution market: PartnerRe
Higher interest rates are no silver bullet
Fear over jobs may turn marine rates: Sompo
Insurers offering M&A insurance more than triple
Aon unveils details of new units
Open source platforms will drive insurtech forward: BMS
A good routine based on trust: Baden-Baden attendees
UnipolRe’s biggest team in Baden
