Mature US market
holds the key
The US market continues to dominate the global life reinsurance industry,
according to Michael Adams and William Pargeans of AM Best.
business ceded over the last few years (Figure 1). There are several
factors driving this trend: the introduction of principle-based
reserves; the 2017 commissioners standard ordinary (CSO) mortality
table; and the increasing use of automated underwriting. Reinsurers
view underwriting as a key area in which to add value and offer
expertise, in addition to affording direct writers an avenue to lay off
risk should actual results deviate from pricing.
In addition to opportunities on the traditional side, reinsurers are
benefiting from an active pipeline of legacy life and annuity (L/A)
blocks of business coming to market. Competition for block acquisitions
is high as many companies, including direct writers and newer entrants,
look to build scale and deploy capital that has grown in recent years.
Well-known carriers, particularly life reinsurers, have developed a
favourable track record for execution and service, enhanced by strong
client relationships, and hold an advantage without competing solely
Meaningful acquisition opportunities for global life reinsurance
players are also evidenced by a growing desire to lay off large pension
Growth opportunities for the global life reinsurance
segment are robust in emerging markets, particularly
within the Asia-Pacific region. The Asia-Pacific direct
life insurance market continues to grow faster than
in developed countries, providing opportunities for life reinsurers to
assume more business.
Even well-established companies in the US, such as the Reinsurance
Group of America, (RGA), receive approximately one-third of their
adjusted operating earnings outside North America.
The US life reinsurance market, in sharp contrast to the country’s
primary life market, is dominated by five carriers, accounting for the
vast majority of assumed business. These top-tier players have strong
capital positions and earnings that reflect disciplined pricing and
mortality experience, as well as a stable book of recurring business.
Moreover, the US life reinsurance business makes up a significant share
of the European-based companies’ global life reinsurance premiums.
While the US traditional life reinsurance market remains pressured
by historically low cession rates, there has been a gradual rise in
SHUTTERSTOCK / PRESSMASTER