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The departure of yet another insurance industry chief executive at the same time that the company runs into issues over its involvement in the finite risk market (see story, page 1) would seem to be yet another nail in the coffin of what was once a useful niche of the insurance and reinsurance market.
As we report on in our Spotlight on reinsurance, due to the investigations into some questionable use of finite products, the use of the coverage has dwindled to the point that the finite sector is in danger of disappearing. And that would be a shame.
While investigations into the use of finite contracts have clearly uncovered some abuses of the coverage, it would be wrong to conclude that all uses of finite risk coverage are illegitimate or illegal.
As a tool for covering difficult risks, for providing less expensive alternatives to traditional reinsurance, and for ensuring that funds will be available to pay future losses, finite risk coverage has served many insurers and policyholders well, and should be allowed to continue to do so.
While we can understand why many former buyers and sellers of the products would now shy away from them, we think that a more aggressive attempt to clarify the rules on the legitimate use of finite risk would be a far more positive approach to the problem.