Five years after the World Trade Center attacks in New York, counterparty security and rating agency input have taken on new importance for reinsurance buyers, according to a report put out today.

London-based insurance broker Willis Group Holdings in its report looking at the secondary insurance industry five years after Sept. 11, 2001, said the days of reinsurers consisting of a single corporate entity with one balance sheet are long gone.

The development of the sidecar special entities have raised questions among reinsurance buyers as to why such vehicles are needed, since they are apparently too volatile to include in the sponsor's main entity. “If it is not good enough for them, why should it be good enough for me?” the report said was the question posed by buyers.

The report also asserted that proportional reinsurance will feel the squeeze as primary insurers increase higher level coverage in an effort to contain their counterparty credit risk.

“Here again, the reinsurers need to look long and hard at their offerings,” the report said. “Simply stacking up security loadings and other price surcharges will only serve to drive away the business that they most need for balance.”

Nick Goulder, international casualty director for Willis Re, the leading author of the Report, said both buyers and sellers are looking for better outcomes.

“The reinsurance world is full of dynamic challenges at the moment and only the most sophisticated strategies are going to survive,” he surmised.

Special Reports /

Credit Risk Key For Re Buyers

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