Structural changes are taking place in the way some companies purchase reinsurance, including consolidating coverage across geography or business lines and paring the number of their reinsurers.

“The large companies are buying reinsurance on a bundled basis, without a doubt, and on a centralized basis,” said Greg Mader, Princeton, New Jersey-based senior vice president of client management for the reinsurance division at Munich Reinsurance America Inc. “Definitely we see the larger companies centralizing their buying approach.”

The change is affecting the property and casualty markets, he said.

“Within casualty, cedents bundle peak exposures and cede them to reinsurers,” Mr. Mader said. “If you're talking about property, some buyers, for example, are aggregating property exposures for all of Latin America, as opposed to for individual countries.”

While the reinsurance market also has been seeing multiyear property deals over the past two or three years, multiyear discussions have just begun in the past year for casualty placements, he said.

“The trend is accelerating,” said Kevin Lee, New York-based vice president and senior credit officer at Moody's Investors Service Inc. “We think we're seeing it for multinational insurers. We've seen companies like (American International Group Inc.) and (Ace Ltd.) accelerate consolidation or centralization of reinsurance purchases.”

In global casualty markets, “we've seen a continued movement towards consolidation ... as companies take advantage of economies of scale, the strength of their balance sheets and the reduced reinsurance risk charges created by combining noncorrelated risk profiles,” said Jim Bradshaw, New York-based CEO of Willis Re North America. “These covers can bring together multiple lines of business from the same or different geographies, with the critical mass generated by the increased subject premium base providing (cedents) with a multitude of structure options.”

Some programs are being bought on a “whole-account basis, rather than peril-by-peril or location-by-location,” said Tom Bolt, London-based director of performance management at Lloyd's of London.

Large insurers, which are managing their risks more effectively, are driving the trend, he said.

Primary insurers' increased sophistication in their own modeling and risk management capabilities allow more efficient reinsurance purchasing, helping to bolster the trend of consolidated reinsurance buying, said Brian Schneider, Chicago-based senior director of insurance at Fitch Ratings Inc.

“I think they've become more sophisticated in understanding their risk around the globe and are able to utilize that knowledge to better negotiate and consolidate their purchasing with the reinsurers,” he said.

This helps, for instance, with the geographical consolidation of reinsurance purchases through improved modeling, he said.

“Companies are better able to quantify their risk and have a more accurate view of how much capital and how much reinsurance protection they really need to support their risks,” Moody's Mr. Lee said.

“There's a deeper level of sophistication on the buyer's part across most companies,” said Phil Campbell, Edina, Minnesota-based executive vice president of BMS Intermediaries Inc. “They appreciate the fact they don't need to buy the same type of products over different divisions.”

For example, entities with similar risks could be reinsured under one contract rather than individual contracts, Mr. Campbell said.

As reinsurance buyers consolidate purchases, they often choose the most financially robust counterparties with the greatest reach and offerings.

“Larger cedents are tiering their reinsurers in consideration of financial strength and size and, in the case of global carriers, tiering their reinsurers based on global reach,” Munich Re's Mr. Mader said.

“I think the trend of consolidating reinsurance purchases is leading to a tiering of the market in which the top-tier reinsurers will benefit to some degree while the bottom-tier reinsurers will be increasingly squeezed out of programs,” Moody's Mr. Lee said.

“Cedents are definitely moving towards having fewer reinsurers on their panel, and they are favoring global reinsurers with a broad product offering,” said Albert Benchimol, president and CEO of Axis Capital Holdings Ltd. in Bermuda, a buyer and seller of reinsurance.

“When we talk about consolidation, it doesn't mean mergers and acquisitions; it means that the business will end up in a smaller number of hands,” Mr. Benchimol said.