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FEATURE: Life reinsurers' low cession rates
18 June 2010
Life reinsurers could benefit from the weakened balance sheets of direct insurers. But cession rates have plummeted in recent years.
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life reinsurance
rga
greig woodring
cession rates
society of actuaries
Life reinsurers did not survive the fallout from the worst economic downturn since the Great Depression without a few battle scars. But direct life insurers suffered much greater injuries. The aftermath of the financial crisis has left reinsurers in position to benefit from the weakened balance sheets of insurers, in addition to an expected increase in block reinsurance transactions, continued demand for traditional solutions and increased interest in non-traditional products. However, the life reinsurance market has been battling plummeting cession rates. The percentage of business being ceded increased from 1997 to 2002. After peaking at 61% in 2002 for US life reinsurers, cession rates have declined steadily. Since then, life reinsurers increased prices, non-traditional players offered reinsurance solutions and direct writers benefited from strong financial performance, a benign credit environment and strong capital ratios. As a result, cession rates plummeted, and the amount of ordinary life reinsurance assumed dropped severely...
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