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Assumed Reinsurance Fell Sharply Last Year, MARC Survey Finds

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Total U.S. ordinary reinsurance assumed fell sharply in 2005, down over 51% compared with 2004, driven by a decline in recurring reinsurance, according to a just-released survey.

The annual survey, prepared by Munich American Reassurance Co., Atlanta, at the request of the Society of Actuaries, Schaumburg, Ill., reflects contributed data from reinsurers.

The survey shows that at 22 participating companies, U.S. ordinary reinsurance assumed declined to $925 billion in 2005 compared with $1.9 trillion in 2004.

Contributing to this decline was a large drop in both recurring and portfolio reinsurance. Recurring reinsurance declined to $843.7 billion in 2005 from $1.037 trillion in 2004. Portfolio reinsurance dropped to $38.7 billion in 2005 from $831.7 billion in 2004. Recurring reinsurance is issued in the same year as it is reinsured, while portfolio reinsurance is issued prior to the year it is reinsured.

The decline in recurring reinsurance is largely due to several factors that include repricing by top reinsurers and efforts of large term writers to pass on risk outside of the traditional reinsurance market, says Dave Bruggeman, an assistant vice president and actuary with MARC.

The reason that portfolio reinsurance declined is less clear, but it is possible there were just not as many portfolio reinsurance opportunities in 2005 as there were the previous year, Bruggeman says.

U.S. group reinsurance assumed also declined, dropping 24.49% to $41.1 billion in 2005 compared with $54.4 billion in 2004, according to the MARC survey.

New group business declined to $36.1 billion in 2005 from $47.7 billion in 2004, the survey reveals.

Bruggeman says that in 2004, there had been a large increase in group reinsurance over 2003, so the decline in 2005 over 2004 may be a return to more typical levels.

In spite of the decline in U.S. ordinary reinsurance assumed, reinsurance in force increased by 5.05% to $6.8 trillion in 2005 from $6.5 trillion in 2004.

The results of the survey were discussed during a June 1 Webcast sponsored by MARC.

During the Webcast, it was noted the 18.7% decline in recurring U.S. ordinary reinsurance assumed in 2005 over 2004 brings it to its lowest point since 1999.

The annual year-over-year change in totals grew from 16.9% in 1995 to a high of a 44.6% increase in 1997 to 2005′s year-over-year decline of 18.7%.

The top five reinsurers as measured by recurring reinsurance, according to the Webcast, garnered 76.6% of the $843.7 billion in recurring reinsurance followed by a 12.6% share for the next two companies and a 10.8% share for the remaining companies.

The top five were Reinsurance Group of America, St. Louis, with $183.5 billion or a 21.7% share; Scottish Re, Hamilton, Bermuda, with $131 billion (15.5%); Transamerica Reinsurance, Charlotte, N.C., with $129.6 billion (15.4%); MARC with $105.3 billion (12.5%); and Swiss Re, Zurich and New York, with $97.2 billion (11.5%).


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