NU Online News Service, Jan. 17, 2:16 p.m. EST
WASHINGTON—A coalition of reinsurance trade groups are warning that protectionist policies by governments on global reinsurers will ultimately backfire because of the important role global risk distribution via reinsurance plays.
The statement by the Association of Bermuda Insurers and Reinsurers and the Reinsurance Association of America particularly cited Brazil's protectionist reinsurance regulation, which the groups said will force domestic reinsurers to pay record losses with less assistance from international reinsurance markets.
The ABIR and RAA statement says in 2011, more than $105 billion insured catastrophe losses were incurred from hurricane, earthquake, flood, brushfire and other natural disaster events.
About 45 percent of these insured losses will be paid by global reinsurers—nearly all of which were not located in the jurisdiction in which the event occurred.
Though the U.S. and Europe were spared from the largest global loss events in 2011, previous evidence (Hurricane Katrina, Windstorm Xynthia) demonstrates that for mega events, a large share of losses are distributed to non-domestic reinsurers, the trade associations say.
"The timely, claims-payment record of reinsurers in spite of record setting losses is well-documented from such historical events," said Brad Kading, ABIR president. "Despite record losses, reinsurers are financially strong; and the reinsurers' track record in paying these large claims is excellent."
Kading cites specific examples, noting that the reinsured share of the very largest losses of 2011 (Australian flooding and windstorms, New Zealand earthquakes, Japanese earthquakes, Thai flooding) were very heavily reinsured.
"The larger the loss, generally the greater share of the loss that flows into reinsurance markets," he continues. "The share of the 2011 mega event cat losses that were reinsured ranged from 40 percent to 73 percent."
The Chilean earthquake, which occurred in 2010, had a reinsured share of 95 percent, Kading added.
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