Several large UK cedants are reducing their spending on facultative reinsurance, according to the view taken by Vanessa Macdonald-Smith, team leader at facultative reinsurance broker, Faber Global, a division of Willis.
Writing on Willis Wire, she noted a variety of reasons for cedants taking this approach. She said: “Some could have found that the outlay spent on facultative premium outweighed the return they earned on claims.
“Others might have found that their facultative spend was in conflict with or duplicated their treaty spend. One cedant also went through a major restructuring which altered the sign-off procedure for facultative reinsurance purchases.”
Macdonald-Smith also noted that the “focus for many cedants has changed too. Most are now more concerned with retained premium income and much less on using facultative reinsurance as an underwriting tool. Cedants want to be confident of the business they write in the first instance, using facultative purchases to enhance, rather than drive the underwriting position.
“So, is this approach working?” she queried. “Only time will tell. The important issue for Faber Global has been to provide analytical and transactional support to cedants during this time of transition, enabling our clients to find innovative ways to spend less money, while still protecting their accounts.”
Source: Faber Global/Willis
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