Reinsurance has been playing a very vital role in the market for around 150 plus years now. As per the historical data abstracted, the concept of reinsurance was started with an agreement passed by Cologne Re around one decade after the incident of Great Fire of Hamburg occurred in the year 1852. Then, somewhere in 1990s Cologne Re merged with Gen Re, which is a subsidiary of Berkshire Hathaway. In addition, two of the industry leaders across the globe Swiss Re and Munich Re got recognized in the reinsurance market somewhere in the middle of 1860-1880s.
The global reinsurance markets acquire around one-tenth of entire insurance markets in terms of volume, however it plays an essential role when it comes to backing up of the solvency as well as capital efficacy in terms of insurance risk distribution. Moreover, even reinsurance like the primary market has witnessed equivalent competitive pressures that includes excess supply & less demand. However, in upcoming years the industry will have ample opportunities that is expected to maintain as well as upturn its importance. This is mainly due to rising number of risk factors and also macroeconomic conditions across the globe are getting more complex and hazardous.
Opportunities, trends and Challenges in Reinsurance Market
The developments in several technologies are driving the entire reinsurance market to triumph the 4th industrial rebellion. Moreover, suitable use of technology will probably result in effective management of the several verticals of insurance companies that will guarantee the improved profits as well as customer satisfaction. For instance, with the proper use of blockchain technology the reinsurance business will result in well-organized and secure paperwork that assuring the safety of customers’ credentials as well as confidential data. On the other hand, one of the major restraint towards the growth of reinsurance market in upcoming years include the vulnerability towards cybercrimes. Some of the biggest incidences of cybercrime consist of computers & in-house software hacking as well as incursion into the intranet gateways. The global reinsurance market is likely to be impacted by the stealing of data on these devices or even cloud for selling them to the competitors. Another, challenge expected to be faced by the market is high designing as well as manufacturing cost of technology.
Reinsurance Market segments:
The global reinsurance market can be segmented by different types and geography. Further, type segment can be divided into P&C (property & casualty) reinsurance, life reinsurance and health reinsurance. P&C reinsurance will be dominating the market on the account of augmenting swiftness and hard-to-replicate significance in a business that is getting gradually more commoditized.
Geographically, market is segregated to certain key regions covering South America (Brazil, Argentina & Colombia), Asia-Pacific (China, Japan, Korea, India & Southeast Asia), North America (United States, Canada & Mexico), Europe (Germany, France, UK, Russia & Italy), Middle East & Africa (Saudi Arabia, UAE, Egypt, Nigeria & South Africa). North America is expected to dominate the market in upcoming years.
The reinsurance markets across the world is augmenting unlike before. Major push in the market is obvious as all the reinsurance market segment are developing at a speedy pace along with the expanding business in terms of both value and volume over the past decade and the trend is anticipated to last for next few years as well. Thus, both insurers as well as reinsurers ought to spot themselves and also utilize this expected growth.
(Distribution Channel - Direct Writing, Broker; End user - Life and Health Reinsurance, Non-Life/ Property and Casualty Reinsurance)
Major players operating in the reinsurance market include Barents Re Reinsurance, Inc., Berkshire Hathaway Inc., BMS Group Ltd., China Reinsurance (Group) Corporation, Everest Re Group, Ltd., Hannover Re, IRB-Brasil Resseguros S.A., Lloyd's, Munich Re, Odyssey Reinsurance, PartnerRe, Reinsurance Group of America, Incorporated, SCOR SE, and Swiss RE Group.
Nowadays, global companies for reinsurance regularly pay the major share for catastrophic claims worldwide that comprises of tail risks (events that are less likely to occur but can cause a lot of damage), for instance September 11 terrorist attack and Hurricane Katrina. Over the past decade, reinsurers had witnessed an average annual payouts of more than USD 110 billion yearly. Apart from cataclysmic events, the business across the different market segments including life, P&C as well as health reinsurance also play a very significant role in terms of assisting several major companies in several methods, for instance, transfer of multifaceted risks, decreasing capital requirements & covering volatility, levelling earnings oscillations, supporting growth with even more ability and refining creditworthiness.
As per a recent study, it was concluded that reinsurance has been the highest performing insurance business since past few decades. Moreover, according to the recoded data of almost last 5 years the reinsurance industry has outperformed the insurance business and stock market approximately by 13 percent. Though, major contribution for this outperformance by non-life reinsurance segment. Additionally, non-life reinsurance stands extremely capitalized and will probably not fall below “A” level against the current capital capability of “AAA” level, regardless of the ratio of catastrophic events that happens to 1-in-250-years. This, is mainly because of the combination of constant inflow of investment with the low rate of interest that makes the existing soft market keep up the pace for at least over the period of near term future.
Reinsurance, alike other key markets experiences an overflow of capital. In addition, almost all of the reinsurance companies across the globe are looking ahead to expand their footprints for more business in the markets of Asia and Latin America regions. On the other hand, companies already established in these regions are looking forward for expansion all across the world.
Mergers & Acquisitions
Since past few years several players in the reinsurance market are continuously consolidating as well as expanding since their turnover & growth restraints, combined with a rising number of suitors keen to pay material premiums towards the present market & book value are attracting several establishments to contemplate a sale. The year 2018 witnessed 2 major agreements were announced trailed by similar tie-ups. Some of those M&A activity include AXA’s (leading insurer in Europe region in terms of gross premiums written) sizeable acquisition of XL Group, this will make XL biggest multiline company.
Besides, some of the diversified dominant players across the globe including Swiss Re, Hannover Re, Munich Re, SCOR and Partner Re are successfully leading the market with major market share.