A persistent economic downturn along with regulatory changes leave reinsurers in “the eye of a storm” and makes growth a complicated issue, according to
Speaking at the annual Rendez-vous
Even with unsettling economic conditions, Lies said
Mumenthaler noted some of the “headwinds”
He added the European Union’s move toward implementing Solvency II by 2014, and the complex state-based solvency work of the
Low inflation and low interest rates are also of concern.
The flip side of the coin, low inflation, is beneficial to reinsurers, particularly in long-tail lines where claims inflation can be kept low, said Mumenthaler. He added claims inflation “goes in line” with general inflation, which means if there is a sudden, sharp rise in inflation it will hurt some reinsurers.
He pointed to a current gap between reinsurers’ shareholder equity and premiums, with the former having been higher since 2005. “That gap goes away if you take out unrealized gains on bonds, which will disappear with high inflation,” he said.
Reinsurers have been using reserve releases to boost the bottom line, a practice that is fine, if one assumes there will be no big jolts to the market, said Mumenthaler. He said it is hard to get data from
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|Source:||A.M. Best Company, Inc.|