Continental reinsurers are cutting back on proportional treaties, which will result in a sharp loss of income, Standard & Poor's said today.
The ratings agency warned that, with many comp ...
Continental reinsurers are cutting back on proportional treaties, which will result in a sharp loss of income, Standard & Poor's said today.
The ratings agency warned that, with many companies favoured non-proportional business.
Proportional business refers to business where the reinsurer takes a share of the premiums and losses ceded by the reinsured.
S&P credit analyst Stephen Searby said: "Although the continental reinsurers continue to write a significant quantity of proportional treaties, the volume of non-proportional business being written is growing at a faster rate."
Continental reinsurers had discovered that their traditional focus on relationship-based, proportional business had produced lower profits than more opportunistic non-proportional lines.
Searby said the shift to non-proportional business would be slow. A sudden change would create the risk of quickly falling business volumes and a corresponding loss of income.
But UK companies could reap the benefits of the change by picking up continental reinsurers' customers.
Searby said: "There are plenty of markets to which continental reinsurers could lose long-established clients as they realign their products.
"Asia-Pacific, Bermuda, the London Market and the US have all reduced their exposure to proportional business since 11 September, instead adopting a more clinical approach to underwriting."
