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MONTE CARLO, MonacoSwiss Reinsurance Co. will not renew the property retrocession business that it acquired with the purchase of GE Insurance Solutions.
The retrocession market has already virtually evaporated according to experts at the Rendez-Vous de Septembre and this latest news from Swiss Re on Monday further underlines how difficult it will be for most primary insurance companies to obtain significant reductions in price from reinsurers at year-end renewals.
Swiss Re did not say how much premium volume would be lost through its decision to pull out of the property retro business but GEIS was a major European player in this market.
On the plus side for the Swiss reinsurance company, Chief Executive Jacques Aigrain said that an analysis of the GEIS book of business since the acquisition was formally completed shows that the group should lose less business than originally expected due to duplication of accounts.
Mr. Aigrain said last November that an initial external assessment of the GEIS business suggested that the combination of the two companies could lead to a loss of about 30% of GEIS's business because of so-called "attrition." On Monday in Monte Carlo, however, he said that better news had emerged.
"We received a pleasant surprise. At the July 1 renewal we retained, on average, about 91% of the business. The proof of the pudding is in the eating but in the January renewals I can say that all the signals are that attrition may be lower than the 30% quoted in November 2005 adjusted for lines we don't want like the property retrocession business," said Mr. Aigrain.
"We are fully dedicated to the enlarged client base. We were surprised at the small overlap apart from in P&C in Europe," he said.
Swiss Re said that reinsurance pricing levels generally will remain firm at coming renewals.
It forecast that property rates, including U.S. natural catastrophe business, will rise while non-U.S. rates will be flat. Casualty rates overall, excluding motor, will show a small decline while motor casualty rates will be flat. Specialist casualty lines like D&O will be flat while marine offshore rates will rise, Swiss Re predicted.
The good news is that the negative developments from the underwriting years 1997 to 2001 have "faded out" and new business is being underwritten on what the company described as "sound terms and responsible risk assessment" that is leading to increasingly good results, said the company.