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Denisa
Dumitru, President of Stellar Re Intermediaries, was interviewed
by PRIMM, a leading Romanian financial news magazine.
A
Looming Crisis
Insurance Companies seeking reinsurance in the international
markets are finding it harder than ever to obtain coverage.
Estimates of the cost of the terrorist attacks that took place
on September 11, 2001 range from $40 to 70 billion. That is
$40 to 70 billion that is no longer available to support the
world’s insurance and reinsurance capacity needs. Quite
apart from this enormous capital drain, reinsurers had been
losing money from both overly competitive pricing and increasingly
large catastrophic events in the years leading up to 2001.
Since then international reinsurers have continued to absorb
major market losses, the massive Toulouse Refinery loss occurring
10 days after September 11 and the Central European flood
losses of this Summer being prime examples. The economic losses
from the floods in Germany alone have been estimated at EUR
10 billion, although only approximately 15% of that amount
was insured.
The impact of such appalling results on reinsurance balance
sheets has caused the major rating agencies to downgrade the
ratings of even some of the largest reinsurers. Many reinsurers
have either curtailed their operations or stopped writing
reinsurance altogether. Gerling Global was the sixth largest
reinsurer in the world and the largest reinsurer ever to close
down. Gerling wrote $ 5.8 billion dollars in premiums in 2001.
All that business is now looking for a new home.
A few billion dollars of new capacity have been added to the
market in the form of new start up operations in Bermuda;
new reinsurers such as Platinum Underwriters, Montpelier Re
and Arch Re. However, these new reinsurance markets, as is
the case with most Bermudian reinsurers, only write reinsurance
on a very restricted basis, concentrating mainly on catastrophe
non-proportional business.
Where reinsurers are still willing to provide proportional
reinsurance, they are imposing significant restrictions and
either limiting or excluding any exposure to natural catastrophic
peril events.
With such a huge reduction in reinsurance capacity the problem
for reinsurance buyers is often not just a matter of pricing,
but whether certain types of cover are available at all. Reinsurers
are reporting that the volume of business on offer is so overwhelming,
it is likely that the New Year 2003 will arrive with many
reinsurance placements uncompleted. All signs point to very
stressful times ahead for reinsurance buyers.
(PRIMM
-December 1, 2002)
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