Biggest reinsurance firms putting their risk management to the test
Wednesday, 08 19 2015, Category: Insurance and Reinsurance, Country: World
It is increasingly apparent from the second-quarter results season that the largest reinsurance companies in the world will, at some stage, see their risk management practices tested, as they continue to take on increasing amounts of risk at lower pricing and with expanded terms. With rates across the reinsurance market down significantly over the last two or three years, while terms and conditions have expanded, significantly in some cases, and aggregate coverage has become increasingly available, reinsurers are naturally taking on more exposure. However they are taking on this expanded exposure at ever lower rates of return and in an environment when they have not been tested by major catastrophe losses. Suggesting that should the market return to more normal levels of major loss, while smaller losses are already being seen to raise the combined ratio, there is a chance that results could be significantly tested in quarters to come.
This looks set to test the enterprise risk management, portfolio management, loss accumulation and aggregation risk controls of the world’s largest reinsurance companies, meaning these sometimes less-celebrated departments of reinsurers will see an increasing focus on their ability to ensure that no undue exposure is being assumed. Many of the major reinsurers have gone for growth in the last quarter, with three of the big four reinsurance companies all reporting solid increases in premiums underwritten in the second-quarter, while the fourth reported steadier increases.