Growth in the U.S life reinsurance market has been challenged due to limited growth by direct writers, but opportunities have taken shape in emerging markets, particularly in the Asia-Pacific region, according to A.M. Best.
Five carriers account for the vast majority of assumed business and continue to dominate the U.S life reinsurance market, analysts noted, which is in sharp contrast to the primary life insurance market.
These top-tier players have strong capital positions and earnings that reflect disciplined pricing and mortality experience, as well as a stable book of recurring business.
U.S life reinsurance business also makes up a significant share of the European-based companies’ global life reinsurance premiums, and the U.S ultimately remains a key market for global life reinsurers, A.M. Best said.
However, the Asia-Pacific direct life insurance market continues to grow faster than in developed countries, providing opportunities for life reinsurers to assume more business.
Additionally, legacy life/annuity blocks of business also have become meaningful acquisition opportunities for global life reinsurers, and recent acquisitions involving second- and third-tier reinsurers highlight growing market competition.
Life reinsurers have also been able to take advantage of more companies laying off large pension obligations, and pension business and other interest-sensitive lines are benefiting from a favourable economic environment with generally rising interest rates and a benign credit environment.
A.M. Best observed that life reinsurers remain active in providing financial solutions, including the continued financing of redundant reserves, providing capital management solutions to assist companies working through regulatory and taxation changes and providing avenues to exit underperforming books.
The rating agency believes life reinsurers must continually invest in technology to stay competitive, utilising new digital solutions and automated underwriting platforms to enhance customer experience and enable companies to maximise the value of their in-force business.
Such initiatives come with a need for meaningful investment, analysts cautioned, including system upgrades and the development of innovative solutions, partnering with technology firms and harnessing the benefits of predictive modelling.
