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Intelligent Insurer
BUYERS SpREAD
THEIR RISk
Purchasers of reinsurance are turning to a
wider range of carriers to cut exposures and
increase security
year ago in early September, as the prevent similar failures in the reinsurance sector? As
A
good and great of the insurance and the industry edged closer to the January 1 renewals,
reinsurance world descended on Monte cedants revealed their concerns about counterparty
Carlo for the annual Rendez-Vous de
credit risk and predicted both a flight to quality and
Septembre, talk was of softening prices, excess capital
diversification among reinsurers. As the industry gears
and what was shaping up to be another below-average
up for this year’s Rendez-Vous and another renewals
hurricane season. by the end of September, some of
season, it is clear that buying behaviour has changed
the biggest names in the banking world had collapsed
for good.
or been bailed out. And it was not just the banking
community. The US government was also forced to
SpREADING THE RISk
step in and rescue AIg, the once impenetrable giant
of the insurance world.
“There’s no doubt that the financial crisis has
changed the reinsurance market. reinsurers may find
Just as the re/insurance community bid adieu to
that business is spread more evenly among them as
the French riviera, hurricane Ike made landfall in
insurers make efforts to share risk even more widely,”
galveston, Texas. It became the third-most expensive
says Andrew Jones, group reinsurance manager at
US hurricane in history, with an insured loss of
specialist insurer and broker Ecclesiastical. While the
$10.7 billion, according to ISO’s Property Claim
financial stability of reinsurers has always been a key
Services. All at once, re/insurers were anticipating
consideration for reinsurance buyers, he thinks the
substantial losses to both sides of the balance sheet and
financial crisis has prompted cedants to become even
wondering how it would impact renewals.
more stringent in their approach.
buyers in the meantime were reeling from the buyers are now looking to avoid concentrations
unprecedented collapses occurring in the banking of risk, which may occur when they place too much
world. If large, seemingly stable institutions with business with just a few reinsurers. “We’ve reacted
strong ratings could fail so dramatically, what was to by increasing the number of reinsurers we use for
September 2009 | INTELLIGENT INSURER | 13
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