Reinsurance and resilience
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Reinsurance fulfills this ultimate safeguard, thanks to its resilience to crises and natural disasters, enabling the entire sector to maintain the continuity of its activities after a loss of exceptional magnitude.
This resilience has been proven time and again in recent years, particularly after Hurricane Katrina (2005), the earthquakes in Japan and New Zealand and the floods in Thailand (2011), hurricanes Harvey, Irma and Maria (2017), the Covid health crisis (2019-2021), and the forest fires in California, Canada, Russia and the Mediterranean region (2020-2022).
Maintaining the fragile balance between insurable and uninsurable risks, and between profits and losses, requires the industry and reinsurance in particular to exhibit:
- a rapid and indispensable reassessment of rates and renewal conditions when the market is in loss. To this end, excess of loss reinsurance, used to cover natural catastrophes, is an ideal instrument for short-term adjustment of premiums to protect mutuality.
- portfolio diversification, with reinsurers' commitments adjusted on a line-by-line, country-by-country basis.
- constant review of pricing models and methods for assessing risks and potential losses.
This rapid adjustment of premiums to claims experience is what makes the strength of reinsurance. In a constantly evolving industry, speed, flexibility and adaptability are essential assets in the hands of reinsurers. Market concentration, with the top ten reinsurers controlling 64% of worldwide premiums, facilitates the adjustment of premiums and conditions.
