Wednesday, April 24, 2013

Reinsurance - villain or hero?

The SMH has a report that conditions in global reinsurance markets have improved with increased supply of capital and may ease pressure on insurance premiums: Premiums that soared may soon be on way down

One of the world's largest reinsurance companies says the cost of protecting Australian underwriters against the risk of natural disasters has peaked, and may fall over the coming years.

After a spate of bushfires, floods and earthquakes in Australia and New Zealand in recent years, the price of reinsurance has risen significantly for companies such as IAG and Suncorp, leading to sharp rises in premiums.

But in a sign pressure on premiums could be easing, Swiss Re says the higher prices have attracted billions of dollars to the reinsurance market in the Asia-Pacific region.

The influx of capital has increased the supply of reinsurance, which is expected to cause costs to stay unchanged or fall.

Reinsurance costs have taken much of the blame for insurance premium hikes in tropical Queensland, particularly strata insurance. Reinsurance has been difficult at times in recent years and increased availability of reinsurance may also assist greater competition in that market.

This report from Suncorp discusses some issues around reinsurance and raises some points to come back to: Reinsurance - villain or hero?

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