Franklin W. Nutter has served twice as president of the Washington-based Reinsurance Association of America, most recently beginning in 1991. He spoke with Business Insurance Senior Editor Mark A. Hofmann about the state of the reinsurance market and legislative issues affecting the industry.
Q: How would you describe the general state of the reinsurance marketplace?
A: The reinsurance marketplace is highly competitive. With several light catastrophe seasons and sound capital management, the industry is as robust in its capital position as it has ever been. There has been modest merger and acquisition activity leaving companies competing in the U.S. and nearly all global markets.
Q: What forces are affecting the marketplace such as European catastrophes and new sources of nontraditional capital?
A: Perhaps the most significant development affecting the market is the introduction of significant nontraditional capital. Brokers and A.M. Best Co. Inc. estimate that nearly 15% of property catastrophe risk — nearly $45 billion — is being provided by alternative capital providers in the form of catastrophe bonds, sidecars and industry loss warranties. With the industry already in a robust capital environment, this additional capital places pressure on reinsurance providers.
Q: What is the RAA's top legislative aim during this Congress?
A: As with other industry advocacy interests, the RAA supports the reauthorization of the Terrorism Risk Insurance Act. The political environment may well pressure the industry to address changes that enhance a private sector role for this risk. The RAA expects to be a part of any such analysis. In addition the RAA supports exploration of privatization in the National Flood Insurance Program. The recent NFIP legislation requires the federal government to explore privatization options with emphasis on transferring risk to the reinsurance sector.
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