NU Online News Service, Aug. 13, 2003, 6:14 p.m. EDT – U.S. insurers “could be leaning ever more heavily on an increasingly rotten reinsurance crutch,” according to Steven Dreyer and Ian Reed, analysts at Standard & Poor’s, New York.
The analysts point out in an S&P commentary on reinsurance collateral that the top 10 U.S. users of reinsurance are counting on reinsurers to make $28 billion in reinsurance payments.
The reinsurance recoverables for those 10 companies amount to 56% of their surplus, the analysts write.
Meanwhile, the analysts warn, many reinsurers are suffering from a combination of high claims rates and poor investment results.
“The fortunes of reinsurance companies are highly correlated with those of their customers,” the S&P analysts write. “In other words, reinsurers are likely to encounter difficulties just when primary companies need them most.”
American International Group Inc., New York, made headlines earlier this year by announcing that it wants all of its reinsurers, not just foreign reinsurers, to back all of their AIG reinsurance arrangements with collateral.