Insurers keep larger share of risks they underwrite in absence of new business

Some insurers are keeping more risk on their own balance sheets in the absence of new opportunities.

“They are incentivized to retain more business because it's a way of growing their net premiums without really having to find new business to write,” said Albert Benchimol, president and CEO of Axis Capital Holdings Ltd. in Pembroke, Bermuda.

“They've been able to take advantage of keeping those profits in-house, which is actually beneficial given that the investment environment is so difficult they are looking for places where they can gain some additional returns,” said Brian Schneider, Chicago-based senior director of insurance at Fitch Ratings Inc. “Not trading away your profits to reinsurers is at least one way to potentially do that on an overall basis.”

“We've seen increased interest in internal reinsurance vehicles as a means of managing risk and reducing the reliance on third-party reinsurers,” said Jim Bradshaw, CEO of Willis Re North America.

Another way to deploy capital is acquisitions, as Validus Holdings Ltd. did in its June purchase of Western World Insurance Group for $690 million in cash. “That's all excess capital that's earning next to nothing in our investment portfolio, so putting it to work in Western World is a good use of cash right out of the gate,” Ed Noonan, CEO of Pembroke, Bermuda-based Validus said when the deal closed.