Looking Ahead at Mid-Year:
Brian McGuire, Senior Vice President
U.S. REviews: June 1, 2001
As we approach mid-year, there are many questions senior executives of insurance companies should be asking themselves about availability and cost of reinsurance for the remainder of 2001 and at January 1, 2002.
The combined ratio for the year 2000 for reinsurance companies reporting to the Reinsurance Association of America was 114.2. Little, if any, changes are taking place that point to an improvement for 2001. However, rates charged by reinsurers for their capacity are likely to increase across all lines simply to offset the continued deterioration of losses on business underwritten during the past three to four years.
With reinsurance companies unlikely to improve results during the remainder of the year, we can expect further consolidation in the reinsurance industry. This year we have already seen the announcement that French reinsurer SCOR will buy Groupama's Sorema. Many chief executives in the industry believe this trend will continue.
Consolidation is on going. Many reinsurance companies are realigning their operations to achieve underwriting profit to make up for past losses. In this climate, buyers of reinsurance at the insurance company level must begin to assess how they can contain costs and at the same time satisfy their company's risk management needs. The simple solution and one most often heard is to raise retentions to mitigate cost increases. However, in today's volatile environment buyers want creative solutions, not excuses or simple remedies.
At U. S. RE we focus on each client's individual needs and arrange custom tailored solutions to maximize risk management objectives at the best available terms. In a hardening reinsurance market environment, the "cookie cutter" approach becomes the least effective, particularly as profit margins are squeezed from all sides. Whether it's conventional reinsurance, alternative reinsurance products, or capital market tools, we can design and deliver a comprehensive reinsurance program working with the largest reinsurers in the world.