Non-life reinsurers moving into specialty lines, says ratings agency

Intensifying competition and declining yield in traditional business lines driving specialisation

Non-life reinsurers moving into specialty lines, says ratings agency

Insurance News

By Gabriel Olano

There is a trend of non-life reinsurers moving into specialty lines as these firms seek increased growth to counter increasing competition in traditional business lines, says global ratings agency Fitch.

According to Jim Auden, managing director at Fitch, industry competition caused a significant weakening in market pricing in the last three years. In 20 out of 25 non-life insurers it had studied, Fitch found an increase in net premiums written for reinsurers moving into specialty lines, such as the mortgage reinsurance market, which is currently quite profitable.

“This is partially offset by reductions in property catastrophe reinsurance business as prices continue to drop, with competition from the alternative reinsurance market,” the ratings agency explained further.

Growth for net premiums written averaged 4.7% in the traditional property and casualty reinsurance lines. Fitch said that the market has been hindered by “sluggish reinsurance demand and opportunistic retrocessional reinsurance purchases.”

The only outlier was XL Group, with a growth in net premiums written of 73.2%, but this was due to its acquisition of Catlin Group in 2015, and not obtained organically.

Swiss Re, on the other hand, was the leader in specialty lines growth. The company has said that it has experienced success in specialised reinsurance products and that it will continue to develop its offerings in the smaller-scale yet more lucrative sector. The global reinsurer will also move into the cyber insurance arena, which is brimming with expansion opportunities, as demonstrated by the recent global ransomware attack.

While Fitch expects continued decline in premiums and investment yields, there remain opportunities for expansion that innovative insurers can leverage to pursue growth.

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