Traditional reinsurers’ market share has been shrinking over the last ten years with business being increasingly lost to captives – despite insurers ceding larger premium portions – investment firm Conning concluded in its recent study on U.S. cedants and reinsurers.
The industry expert interview-based study, “Buyer Trends in Property-Casualty Reinsurance: A Look at U.S. Cedants and Their Reinsurers,” said traditional reinsurers have lost up to 20 points of market share in the past ten years.
Steve Webersen, Head of Insurance Research at Conning, commented on reinsurers’ loss of business; “Our analysis indicates 11 of the top 25 assuming entities were nontraditional reinsurers, either captives or government-sponsored entities, accounting for nearly 30 percent of the assumed premiums from that group.
“Within the traditional reinsurer group, stalwart leaders have defended their market positions, while others have not.”
Conning said few industries have been as dynamic and fast-changing as the insurance and reinsurance space in recent years.
The study investigates the extent of the dramatic change, for an industry that otherwise had spent many years resting on its laurels of relative familiarity with business and customer service patterns.
Matt Sternat, a Vice President, at Conning Insurance Research, said; “The lack of catastrophes, inroads from alternative capital, and changing buyer patterns have led to dramatic consolidation and change among reinsurers.
“Reinsurance buyer behavior has been mixed, with concentration in reinsurer panels among larger cedants, but more diversification beyond the top 25 buyers.”
The study re-examined the re/insurance industry’s commonly held belief that reinsurer panels are shrinking as consumers choose increasingly to “work with fewer and larger reinsurers,” and that this has driven reinsurance industry consolidation.
Conning said; “While we found it is true that reinsurer panels have shrunk among larger buyers, that trend did not hold true beyond the top cedants.”
While technology and emerging risks may be the headline grabbing buzzwords, the study pointed to an important but underreported factor; although the industry’s makeover is well underway, much business is in fact still relationship-driven: “Our research and interviews confirm that the procurement of reinsurance is a global business, increasingly complex and sophisticated and one that is still largely relationship-driven.”