GE Solutions Publishes Study of German Reinsurance Market

June 8, 2005

GE Insurance Solutions and the Institute of Insurance Economics of Switzerland’s University of St. Gallen have issued a joint study of the German reinsurance market from the point of view of the buyer, the primary insurers who rely on reinsurance for cover.

GE’s bulletin said: “The Reinsurance Market Index polled primary insurers on key market indicators such as rate on-line, attachment points and limits for non-proportional, as well as ceding commissions and retentions for proportional treaties.”

Based on the feedback the study received from participants, it concluded that the “reinsurance market in Germany at 2004 renewals appeared stable for most lines of business. The aggregated results for both motor and general liability showed little change in terms and rates for renewals, while both personal accident and property showed an overall rate decrease, generally driven by a limited number of specific treaties.”

“This landmark survey helps bring additional clarity to the discussion of German market issues,” stated Inga Beale, leader of Continental Europe markets at GE Insurance Solutions. “Where other surveys have sourced data from third parties, this survey goes directly to the buyers of reinsurance. It’s another example of GE Insurance Solutions sharing its risk expertise with its customers.”

In addition to experiences at renewal, the survey also revealed what’s on the minds of primary insurers as they look ahead. According to the survey, primary insurers view Solvency II (the new financial accounting standards, also known as Basel II) and capacity for natural catastrophe coverage as the major challenges in the markets where they buy their reinsurance.

“Respondents were also asked to identify trends and developments in the reinsurance marketplace,” the announcement continued. “They noted a trend toward increased spreading of risk among multiple reinsurers, and indicated they anticipate having to take higher deductibles and expect reinsurers ask for more exclusions.

“Participants in the survey also stated that non-proportional reinsurance coverage is gaining prominence in the German market. The survey reveals not only a shift towards non-proportional policies in general, but the integration of non-proportional policy elements into proportional covers and an overall stricter handling of proportional covers.

“As for the degree of financial strength insurers require, participants stated that they prefer a minimum rating in the range of ‘A+’ to ‘A-‘ for their liability reinsurance cover. For property business some participants allow a lower minimum of a ‘BBB’ rating.”

“This study is a first step toward the goal of establishing a Reinsurance Market Index for the European reinsurance markets,” explained Dr. Mukadder Erdoenmez, Director of Business Projects and Studies at the Institute of Insurance Economics, University St. Gallen. “With the continued cooperation of reinsurance buyers, our ongoing study will provide more insights into the underlying patterns of this market. Over time, this will develop into valuable tool that allows market participants to have a clear, objective view of the conditions that impact their business.”

To read the survey summary, click on http://www.geinsurancesolutions.com/erccorporate/documents/

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