Reinsurers Need To Move Faster To Keep Apace Of Risk

In 2001, between $4.5 trillion and $5 trillion in insurance was ceded to reinsurers compared with approximately $4 trillion in 2000 and $1.1 trillion in 1993, according to Dubois.

While there are a number of bright spots in the life reinsurance market, the reinsurance industry as a whole needs to address some immediate issues.

With industry estimates of roughly $50 billion in losses, Lescault says terrorism was neither underwritten or priced for, and consequently, the industry did not price for that risk.

Underwriting going forward is evolving, he added. It is moving from excluding coverage to reaching an exposure assessment such as whether and how to reinsure a structure such as the Sears Tower, for instance, compared with a suburban shoe store business, he said.

Citing sources including Morgan Stanley and IBNR weekly, Lescault added that for the entire reinsurance industry there is an estimated loss of $103 billion in capital with new capacity of just $31 billion planned for 2002. Of that total, he said $20 billion would be accessed through the Bermuda market and it was estimated that about $10 billion would be raised industrywide.

The $103 billion loss includes $50 billion from the World Trade Center catastrophe and $53 billion from a drop in stock and bond values.

Lescault also noted that going forward, markets will not generate the investment income that they have in the last decade and consequently, underwriting results need to be stronger.

Reproduced from National Underwriter Life & Health/Financial Services Edition, April 1, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.