The findings follow A.M. Best’s most recent examination of the reinsurance purchasing trends of European insurers ceding the highest amount of non-life premiums based on companies’ full-year 2015 and 2016 interim data (when available). In 2015, total non-life premiums ceded for the 20 largest European cedants rose by 17.9% to
Carlos Wong-Fupuy, senior director, said: “Some of the largest insurers have increased their reinsurance purchasing as they take advantage of the soft rate environment and optimise the efficiency of their own capital. The need to protect capital and make it more efficient has become even more important following the implementation of Solvency II in 2016. The European directive imposes significant capital charges for insurers retaining particular products involving significant claims uncertainty and volatility, especially in the long term. Purchasing reinsurance protection such as stop loss or adverse development cover on reserves can be an efficient mechanism for reducing capital requirements.”
The report, titled, “European Cedants Continue to Increase Reinsurance Buying but Demand for Cover Slows,” notes product diversification also has been a contributor to increased reinsurance purchasing. Underwriting new lines of business can grow a company’s top line, but requires additional reinsurance support, which can provide technical assistance, as well as capital.
In 2015, overall retention ratios for the 20 largest European cedants fell to 86.7% from 88.1%. Based on interim data available for 15 of the 20 largest cedants, the retention ratio stood at 86.2% in the first half of 2015, but this slipped to 85.8% at first-half 2016. The report states it appears that insurers are continuing to retain less risk, although the rate at which they are increasing reinsurance purchasing has slowed. While it is still too early to determine if this will become a clear trend,
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Carlos Wong-Fupuy, +44 20 7397 0287
Director, Public Relations