Decoupling of reinsurance pricing and risk
Saturday, 12 30 2017, Category: Insurance and Reinsurance, Country: World
The decoupling of reinsurance pricing and expected reinsurance losses is “a less-than-ideal business model” according to analysts at Keefe, Bruyette & Woods, who feel that price hikes tend to be a reaction to losses, rather than being commensurate with a changing view of risk.
It’s a subject we’ve written about before, that reinsurance price rises tend to be more about being paid back, than an increase in the actual risk profile.
We’ve suggested before that reinsurers should seek to be sustainably compensated for holding the level of risk, over the long-term, rather than competing prices down, discounting for diversification, and then seeking large price increases when the worst happens.