Reinsurance News | By: Marianne Lehnis | October 03, 2017:
Reinsurers could place lines of business at risk by failing to properly investigate the financial profile of cedants before taking on their risks, Litmus Analysis warned.
“There’s a general consensus among reinsurers that this is an important part of the reinsurance process, but generally with little clarity about how important or what to do about it,” said Litmus.
Analysts highlighted that it’s not uncommon for carriers’ to run into financial difficulty, and this can have severe repercussions for reinsurers: “Yet just last year in the UK, two fairly high-profile primary carriers ceased underwriting due to financial duress, and the UK is not alone.
“Those of us with grey hair know the trail of problems that can leave behind, although, of course, mostly for policyholders and brokers.”
Reinsurance underwriters show a trend of focusing on superficial risks, instead of the broader financial picture of the firm.
However, looking at a cedants’ overall financial health becomes more important the closer the reinsurer is to “following the fortunes’. If you’re writing their long-tail Quota Share, it should be highly important; if you’re just at the top end of the cat programme, less so.”
Litmus analysts warned that “there have been many occasions when the sister company or parent has failed and brought the whole business down with it.
To read full article – please click here.
