World life reinsurers probably will be assuming less business, and that contraction should be good for the market.

Laura Bazer, Joel Levine, and Robert Riegel, analysts at Moody’s Investors Service, New York, have included that observation in a new report on the global life reinsurance market.

Despite worries about perils such as avian influenza, life reinsurers are doing well, and their ratings are not under negative pressure, the analysts write.

At the moment, more pressing concerns include increasing industry concentration and increasing collateral requirements, the analysts observe.

In the United States, 5 reinsurers now handle about 80% of U.S. individual life business in force, the analysts write, citing figures from a May study conducted by Munich American Reassurance Corp. and the Society of Actuaries, Schaumburg, Ill.

Consolidation can help companies grow quickly and increase efficiency, but it also can make profits more volatile, the analysts write.

Meanwhile, access to “retrocession” arrangements, or reinsurance for reinsurers, is vanishing, and that is leading to more reliance on bank letters of credit, the analysts write.

The life reinsurance market seems to be headed for a downturn in annual premiums assumed, but this may be something of a blessing in disguise, Bazer says.

“Despite the drop in top-line growth, we believe that the downturn should prove to be a salubrious pause that will allow reinsurers to correct past underpricing on certain lines of business and to eventually improve profitability,” Bazer says in a statement about the life reinsurance review.

The analysts point to life reinsurers’ increasing use of capital markets to manage risk exposures and their balance sheets, particularly with regard to Triple-X reserving requirements, as a positive development.

Additionally, the market is witnessing the growth of a new reinsurance niche for blocks of business assumed, the analysts write.