23 October 2016Insurance

EMEA’s 50 biggest P&C cedants

As the reinsurance industry moves on to negotiations in Baden-Baden, 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 Europe, the Middle East and Africa (EMEA).

This 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, in these tables in particular, a number of the entities included are actually subsidiaries of larger groups domiciled in other parts of the world. As such, some show a very high ceded premium ratio when, in fact, this 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.

Finally, a couple of very big groups in Europe do not report their P&C ceded premiums, including Lloyd’s of London and Mapfre.

The following tables, however, give a pretty good indication of which groups in Europe 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 50 insurers here, 27 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.

The business model of Admiral, for example, very much relies on buying large quantities of reinsurance and holding only a small portion of the risk itself—a business model that has helped the UK insurer enjoy stellar growth and post big profits on a regular basis over the years.

Some of the insurers here with very high ceded ratios are subsidiaries of companies based elsewhere—often Bermuda. Their high ratios are possibly because of inter-company arrangements within the groups.

The very biggest buyers overall, however, will be no surprise. The likes of Zurich, Allianz, AXA and Aviva 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.

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23 October 2016   The majority of attendees at the reinsurance conference in Baden-Baden attend in order to negotiate with clients in relation to the year-end renewals or reaffirm relationships with existing clients in a relaxed environment—with several stressing how pleasant the German town is in comparison to the faster-paced Monte Carlo Rendez-Vous.