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Swiss Re Unit Chief%3A Cession Rates Will Bottom Out

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Life insurers may keep more business on their own books, but they are unlikely to reduce use of reinsurance to the levels seen in the early 1990s.[@@]

Weldon Wilson, chief executive of Swiss Re Life & Health America, New York, gave that assessment today at a year-end review.

Life cession rates have fallen to 57% today from 61% in 2002, but there are a number of potential growth areas for reinsurers, Wilson said.

Annuities and universal life insurance products are example of growth products, Wilson says.

But annuity rider prices have to reflect the actual cost of providing the riders, and the reinsurers need to “partner with clients and have a clear alignment of risk,” Wilson said.

Wilson also expects to see hedge funds, individual investment funds, pension funds and insurers investing in a growing number of life block securitizations.

But use of life securitizations has been limited to date, and Wilson says an insurer needs a deal with a value of at least $200 million to complete a securitization transaction efficiently.


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