Reinsurers to keep writing even below cost-of-capital
Tuesday, 08 16 2016, Category: Insurance and Reinsurance, Country: World
Marsh & McLennan President & CEO Dan Glaser said it plainly during the insurance, reinsurance broking and advisory giants Q2 earnings call. In a soft market insurance and reinsurance firms are likely to keep underwriting even when returns are below their cost-of-capital.
It sounds unintuitive, perhaps crazy to some. Why continue to put capacity at risk when the returns are no longer supportive of the ongoing maintenance of the capital backing it?
The answer of course lies in the insurance and reinsurance industries reliance on long-term relationships and diversification.