Article Abstract:
The reinsurance industry is in the middle phase of reevaluation and price tightening cycle that should peak at the end of 1984. New regulations, such as New York Regulation 98, will limit the reinsurance market by demanding more careful investigations of the houses assuming reinsurance. This may have a more limiting effect than pure underwriting considerations. Pro rata arrangements have been the most greatly disrupted. Ceding commissions often exceed underwriting profits. Reinsurers are unwilling to write unprofitable risks. The capacity problem can be adequately serviced through the excess of loss reinsurance. Faculative insurance capacity will be small by year end as reinsurers retreat. Further regulation of the reinsurance industry could impede its growth. Restraint must be exercised not to regulate in this tight market.
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Article Abstract:
Insurers attending the National Assn of Independent Insurers' annual conference were told to brace themselves for a sharp decline in reinsurance capacity and higher rates. The predicament of Lloyd's demonstrates just how bad things are. The catastrophic losses it incurred as a result of Hurricane Andrew will force Lloyd's to reduce capacity by about 1 billion pounds sterling in 1993. Reinsurers are scrapping five-year plans in favor of one-year plans in light of recent catastrophes. Surplus carriers are expected to pick up the slack.
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Article Abstract:
The growth of the alternative risk markets, increased competition and greater insurance company retentions continue to influence the supply and demand of facultative reinsurance. Ceding companies find that facultative reinsurance continues to fill a need that primary underwriters are unable to fulfill. Amid cyclical changes in the reinsurance market place, facultative coverage will continue to meet the needs of the marketplace.
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