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EU, U.S. reinsurance deal positive for EU reinsurers: Deutsche Bank

24th January 2017 - Author: Luke Gallin

Generally, the recently announced transatlantic reinsurance agreement between the EU and the U.S. is positive for European reinsurers, but it could be some time before the benefits are realised, according to Deutsche Bank analysts.

Discussions of a proposed deal between the U.S. and the EU had been ongoing for some time, and the pair announced an agreement earlier this month that aims to boost the $3 billion transatlantic reinsurance industry.

Analysts from Deutsche Bank have said that generally, the agreement is a positive for EU reinsurers, and also for Lloyd’s of London syndicates, providing the UK is an EU member. Overall, the global reinsurance industry reacted positively to the news, “but hopes for a quick and bigger impact had been dampened,” says Deutsche Bank.

Following the Brexit vote in the UK in 2016 the Lloyd’s, and London re/insurance marketplace remains in uncertain territory. While the UK government has said that it’s working to ensure the country’s financial services industry is able to operate in a similar manner post-Brexit as it has grown accustomed to, the complex economical impact of an evolving regulatory landscape has undoubtedly resulted in uncertainty. And only time will tell what impact Brexit has on the UK’s re/insurance industry.

“The effect on individual reinsurers will depend on the type of business and on the US state they do business in,” said Deutsche Bank on the EU, U.S. reinsurance deal.

“Within our reinsurance coverage we would expect the biggest positive impact for Hannover Re as it underwrites US natcat risks mainly via Bermudian operations and US life partially via its Irish subsidiary. Munich Re and Scor which run US domiciled operations should see a lesser effect and Swiss Re as a non-EU reinsurer will not benefit from this arrangement at all,” added Deutsche bank, in its January European Reinsurance Market Research report.

The agreement will look to remove collateral requirements for EU reinsurance companies in the U.S., and while this has been received positively by the sector, “reinsurers also pointed to a still long process to go for full implementation, pointing to the earliest impact in 2019,” said Deutsche Bank.

A number of reinsurance industry experts and analysts have commented on the agreement following the announcement, and some varied opinions have been expressed. While some expect the deal to be win-win for all parties, others have taken a more sceptical approach and questioned some aspects of the deal.

For analysts at Deutsche Bank, however, the deal is a positive one, at least for EU reinsurance companies, and potentially Lloyd’s of London syndicates.

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