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Demand for reinsurance could increase based on market conditions
03 November 2008
US cedants are increasingly retaining their business. AM Best examines how reinsurance buying habits will change.
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The trend of US primary insurers maintaining higher premium retentions continued during 2007 and nominally increased when compared with the previous year. Market surveillance through the July 1 2008 renewals indicated continued high but relatively stable primary retentions. Fuelled by vastly improved capital positions and more adequate loss reserve bases, primary carriers for the past several years were able to reap greater portions of the hard market accident years as well as underwriting years 2006 and 2007, whereby catastrophe activity was relatively modest.
During the first six months of 2008, primary carriers in total have produced underwriting profits, though at more pronounced margin reductions, and many carriers have experienced write-downs related to devalued assets. The outlook for the second half of 2008 will likely bring more challenges for primary companies, especially those with increased catastrophe exposures from higher first-dollar premium retentions. During the third quarter, predictions of an active hurricane...
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