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The IAIS published its fourth annual global reinsurance market report which provides an overview of the financial condition of reinsurers. The report considers future challenges to the market, concluding that the sector remains robust and that low levels of losses during 2006 have improved the industry’s financial condition.
The report analyses exposure and premium statistics submitted by the world’s largest reinsurers relating to their business in 2006. The data shows that 2006 was significantly more benign for reinsurers than 2005, which saw record losses. The industry must now turn to the challenge of managing the downturn in the economic cycle, already apparent in many markets.
As risk mitigation practices evolve, reinsurers are exploring new methods to diversify risk. Global Reinsurance Market Report 2007 addresses such activities, including credit risk transfer, the transfer of insurance risk to the capital markets, and portfolio diversification. The losses incurred in 2005 likely accelerated growth in the use of these instruments.
The report explores future challenges faced by the life reinsurance industry, an area which until now has received little attention. Life reinsurance challenges include both one-off catastrophe-type risks, such as a pandemic which gives rise to a marked short-term increase in levels of mortality, and issues arising from longer-term trends, such as longevity and levels of obesity in western societies.