The Future of Reinsurance

Reinsurance

Reinsurance, the practice where insurance companies purchase insurance for themselves to remain solvent, is likely to continue into 2016, according to a recent report from Standard & Poor’s. In fact, predictions state that investment companies not usually involved with insurance are increasingly likely to want to get in on the deals, too. Sure, there might be a bit more risk in the venture going forward, but so far, things are looking up for companies already in this area, as well as companies looking to get on the playing field.

Firms like New York-based J.C. Flowers & Co. and Los Angeles-based GenRe are poised to lead the pack as more investment holding companies move into the insurance space and make new deals.

“Globally reinsurers have seen the future, and it requires greater scale and diversification for them to remain relevant,” said the S&P report.

This upturn in future trends comes in the wake of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which sought to put more restrictions on surplus lines policy, including collecting premium taxes, in the post-2008-financial-crisis world. While experts agree not all of the goals of the Act have been met yet, the changes in the reinsurance industry have been primarily good.

“So far, everything we are hearing from our membership and the wholesale insurance community is very positive,” said Bernd G. Heinze, the executive director of the American Association of Managing General Agents.

As with anything in the financial sector, risk still exists; however, S&P expects the positive trends to continue, particularly in the wake of some serious purchases: Fairfax Financial Holdings bought Brit plc in July for $1.9 billion; Fosun International bought out the rest of Ironshore for $1.8 billion; and EXOR has expressed interest in buying PartnerRe for $6.9 billion.

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About DevonJ140
I am currently an Accounting Director living in New York City. I love reading and learning more about business, finance, tech, and current events.

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