Reinsurers under pressure

The financial crisis lingers on. State and banks’ debts are in the scrutiny of rating agencies, more than ever determined to denounce bad students. In fact, the entire financial system is in turmoil.

Even reinsurers, whose half-year results are more than respectable and who are largely funded, remain affected by skepticism. How much longer will they be able to withstand an ever-deteriorating economic and financial environment?

The decline in interest rates combined with stock market slump has triggered a decrease in financial revenues which they are bound to consider in their rating system.

From a technical point of view, the losses caused in 2011 due to the exceptionally nasty natural catastrophes will affect reinsurers’ results and shareholders’ equity.

During the current year, much of Asia was submerged by floods, while earthquakes and hurricanes have devastated other parts of the globe.

These losses, unable to compromise the economic model of the reinsurance business, highlight the difficulties of the market to develop in such a context characterized by:

a standing financial and economic crisis with "cycles within the cycle"
extreme volatility of results
globalization, which multiplies and amplifies risks. The earthquake in Fukushima in Japan led to a drop in deliveries of spare parts in the United States, Europe and China, which on its turn caused problems for corporate users.

In fact, one solution would be to impose more transparency in risk management and strengthen insurers and reinsurers’ control systems.