Weldon Wilson, CEO of Swiss Re Life & Health America, said there is a growing interest among life reinsurers to look at longevity risks associated with annuities as well as an increased interest in the long term care market. Annuities and universal life products are growth products for the industry, he said.
Speaking at Swiss Re’s annual review here, Wilson said reinsurers will be looking at ways to meet needs associated with these products. For reinsurers to look at the annuity market and guarantees associated with many of the products, they need to “partner with clients and have a clear alignment of risk,” he said.
Annuity riders also need to reflect actual cost, according to Wilson.
He also said there will be an increase in securitizations even though the use of these vehicles among life insurers has been limited to date. Securitizations that have been done are related to guaranteed level term products, which face extra reserving requirements associated with Guideline Triple-X, a reserving regulation.
However, he explained, the transactions are complex and a size of at least $200 million to $300 million is needed to complete the transaction efficiently.
There will be more packaging of life and non-life risks, he said, because securitizations offer insurers an alternative to issuing stock and taking on risk. Interested investors, Wilson continued, include private investors including hedge funds, individual investment funds, pension funds and insurance companies.
Wilson also referred to a reduction of cession rates, the rates at which direct writers cede business to reinsurers. He said life cession rates will continue to consolidate but not to the level of the early 1990s. Since 2002, cession rates have declined to a current 57% from 61%, Wilson said.