Atlas Magazine November 2005

Calmness, against all odds

Neither resounding bankruptcy, nor planetary disaster will do. Reinsurers have stumbled, but not fallen.

Despite alarmist forecasts, the black series of disasters of all kinds (earthquakes, floods, cyclones, plane crashes, ...) has not undermined the reinsurance market.

Having occurred in a rather favourable context to reinsurers, the 2005 summer natural catastrophes, especially Katrina, have been a benchmark test for the market soundness and «an opportunity» to validate the reinsurers' different strategic options.

Test results: the traditional reinsurers headed by Munich Re and Swiss Re have resisted the shock. Particularly hit, «the Bermudans» have managed to get back on a sound financial footing by proceeding to capital increases. A reactivity that may be construed as a strong signal of the investors, who upheld their trust in reinsurance.

Other reinsurers, such as SCOR, came out unscathed as to they had previously chosen not to underwrite natural catastrophe risks in the USA and to considerably reduce their commitments in the American market.

As far as the 2006 renewals are concerned, the calmness displayed by reinsurers should trigger an increase in selective tariffs. The rising readjustments will concern in priority natural catastrophe covers in the areas that are most exposed geographically (Gulf of Mexico, Central America, Europe and Asia). Retrocession treaties and oil risks are well in the reinsurers' sight.

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