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Friday, December 1, 2006
Net retentions up

Increased net retentions by major insurance companies has been attenuating the need for proportional reinsurance in the South African.

‘Proportional reinsurance’ is a mechanism for insurance companies to transfer part of their risks; and should any claims occur the reinsurer will pay towards the loss, determined by the proportion accepted. This way insurance companies protect their assets against heavy, unusual or catastrophic losses. It is more important for smaller insurance companies; the larger companies, however, are increasingly able to spread potentially large losses across their own underwriting portfolios.
Potential catastrophe claims remain an important aspect of all reinsurance programmes, including for the bigger companies; on the other hand, their sheer size means they can increasingly carry the risks associated with everyday exposures
Adriaan Louw, operations director of MUA Insurance Company, comments, “So reinsurance companies are consequently left to look for growth in the previously largely ignored one third of the market, including specialist firms such as ours, where support for ‘ground-up’ reinsurance is strong due to smaller financial reserves to carry losses for their own account.”
Reinsurers are able to devote more attention to the needs of the smaller, independent firms

Copyright © Insurance Times and Investments® Vol:19.6 1st December, 2006
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