In its latest annual global reinsurance report, The International Association of Insurance Supervisors has shown the reinsurance sector to be in good financial health this year, following last year's damaging list of unparalleled natural catastrophes.
The International Association of Insurance Supervisors’ (IAIS) Global Reinsurance Market Report 2006, which is based on global reinsurance statistics for 2005, covers a high proportion of reinsurance activity worldwide.
Despite enormous losses, in particular from windstorms in the US during August and September 2005, the global reinsurance market statistics indicate that the reinsurance sector has proven resilient, with no major failures as a result.
The market has reacted in a number of different ways to the events, the report shows. These include re-pricing of US catastrophe risk, reappraisal of risk management tools and how they are used by reinsurers, an increase in the capital markets’ appetite for (re)insurance risk and a greater focus on the benefit of diversification.
The reinsurance sector has shown considerable resilience in the face of two years of higher-than-expected natural catastrophes. Even so, there is still potential for under-provisioning, under-pricing, major latent casualty exposures and natural catastrophes worldwide, all of which have the potential to pose significant challenges for reinsurers’ solvency and risk management capabilities, commented Julian Adams, chairman of the IAIS Reinsurance Transparency Group, which produced the report.
The reinsurance industry assumes risk from all parts of the insurance market, with risk and exposure management needing a wide focus to ensure all issues are properly understood and quantified, he continued.
The report also highlights the significant contributions made by capital markets in backing capital-raising initiatives by existing reinsurers, as well as supporting the formation of various new players.