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Product Development Is Key To Success For Independent Reinsurance Brokers

Mark Lucas, Managing Director of U.S. RE - Europe, believes independent reinsurance brokers can compete successfully with the giants by creating innovative products. He has proved his point over the last three years with development of TRIP (Technical Result and Investment Portfolio), a reinsurance cover which protects an insurer's investment portfolio.

Unlike typical multiple-trigger programs in which two events such as a natural catastrophe exceeding $500 million and a drop in the S&P 500 index below 900 have to occur in the same year before the insurer can make a recovery, TRIP pays if the combined result breaches a certain threshold. The triggers defined in the contract are inter-linked. It is irrelevant how much each trigger contributes to the result. Therefore, a structure of this kind offers clients true bottom-line protection.

The product was first placed for the year 1997 protecting the technical result and the result of the bond portfolio. When renewed for 1998, results from the stock portfolio also were included. Since launching TRIP, Mr. Lucas has worked with a panel of reinsurers who are now providing capacity for insurance companies on their overall balance sheet. Some 30 reinsurance companies have expressed interest in TRIP, and approximately half of them have actually written the product.

Mr. Lucas cited TRIP as an example of how creative product development can help an independent reinsurance broker compete effectively for niche business. He developed this theme in an article that appeared recently in Reinsurance Magazine. A reprint of the article is enclosed with this issue of U.S. REviews.