Reinsurance: Interesting times ahead
Dear Readers,
Hope this newsletter of ours finds you in the best of health. This edition of the newsletter highlights the changing landscape of the Reinsurance business.
Reinsurance is insurance purchased by insurance companies to mitigate the risk underwritten by them. Reinsurance can be broadly classified under two heads – Treaty Reinsurance and Facultative Reinsurance.
Reinsurance players invest premiums collected from insurance companies to build up a portfolio of financial assets which can be used against future claims. The Reinsurance market size is based on the value of the premiums reinsured by insurers.
Major companies in the reinsurance market include Munich Re, Swiss Re, Hannover Re, Lloyd’s of London, Berkshire Hathaway Inc., Talanx, Axa Group, SCOR SE, China Reinsurance (Group) Corp, Reinsurance Group of America Inc., etc.
The global reinsurance market is expected to grow from $503.73 billion in 2021 to $812.37 billion in 2026 at a compound annual growth rate (CAGR) of 9.8%. (Source: Reinsurance Global Market Report 2022 by Research and Markets)
India is expected to become the sixth largest insurance market in the world in the next 10 years supported by regulatory push and rapid economic expansion with premium growth of 14% per annum over the next 10 years as per the World Insurance Report published by the Swiss Re Institute.
Growth in the Indian Reinsurance industry is expected to be encouraged further due to the recent regulatory changes by the Insurance Regulatory and Development Authority of India (IRDAI), which encourages offshore companies to set up operations in the country. Further, low insurance penetration, frequent occurrence of severe catastrophes, recent regulatory reforms on crop insurance, and the entry of numerous foreign players are expected to propel industry growth.
Although globally the reinsurance market is well capitalized, the changing nature of the risk has forced reinsurers to adjust risk appetites and pricing thresholds in response to ongoing and emerging sector challenges. Key drivers of evolution in the reinsurance market are climate change, cyber threats, inflation, and the continued evolution of frequency and severity of catastrophe losses. They are changing how reinsurers underwrite risks and view pricing and capacity allocations.
The industry is challenged by rapid technological change, disruption through new and more efficient forms of capital, and an evolving risk landscape. In this challenging environment, organizations that can harmonize analytics, technology, industry innovation, and modeling will emerge as success stories. Organizations need to have a strong appetite to make use of the available big data and invest in new technology and analytics capabilities that can help them differentiate and design new products and services. Organizations need to be able to collaborate with organizations with such expertise and work jointly.
Blockchain is another useful technology that can increase the efficiency of reinsurers and help in bringing down prices. Reinsurance providers are integrating their processes with blockchain technology to reduce costs and increase efficiency, transparency, and security associated with client data and other financial transactions.
领英推荐
While technology enhances our ability to better assess, manage, and monitor risk, it also creates new risks. It is also contributing toward the change in the nature of existing risks.
As a way forward, access to new data sources and an ability to understand, interpret, and use the data will be key differentiators in improving the speed of claim settlement and offering products that are fit for purpose and reflect today’s risk landscape.
With the growing development of niche lines of business such as cyber, parametric products could be one solution to providing meaningful coverage for a rapidly-evolving corporate risk.
The evolution of the cyber reinsurance market also points to a new opportunity in a data-rich age: pre-loss services. By accessing a large sea of claims and third-party data sources, successful reinsurers will be in a better position to help insureds become more resilient and incident-ready. These services include security consultancy, breach-response services, and simulated cyber-attacks to test the strength of corporate networks and raise awareness among staff.
As a result of evolving customer choices and pricing competition, reinsurers across the globe are now offering bundled products and services. They can provide wider coverage, reduce costs and enhance their revenues. They can provide coverages at the group level, reducing the need for segmented reinsurance at different levels.
At Anand Rathi Insurance Brokers Limited (ARIBL), we have a team of experts that works closely with the Insurers and Reinsurance players domestically as well as internationally to help our esteemed clients with reinsurance placements.
Every one of us has an important role to play in the work ahead and I’m confident that together we will achieve great things.
Kind regards,
CEO and Principal Officer
Anand Rathi Insurance Brokers Ltd.