Panelists Speak Up For Financial Reinsurance

But speakers noted that securitizations also are common, and that there might be at least one or two securitizations that are not announced publicly for every publicly announced securitization.

Laura Bazer, a senior credit officer at Moody’s Investors Services, New York, said life reinsurance is “an absolute necessity and key to the functioning of the direct industry.”

But Bazer expressed concern about the concentration of risk that has resulted from market consolidation, and she said she believes that “this is still a hand shake business, although it is changing gradually.”

If rating agencies are going to give credit for reinsurance, there has to be an actual transfer of risk, not just “debt masquerading as reinsurance,” Bazer said.

The rating agencies do not prefer securitizations to financial reinsurance, Bazer added.

Burt, the Hannover Life Re executive, said later in the discussion that financial reinsurers lack the ability to go back and tap a direct writer’s surplus.

If a ceding insurer does not perform well, then there is no recourse for the reinsurer, Burt said.

Burt gave contracts that offer experience refunds based on how a reinsured block of business performs as an example of a type of financial reinsurance contract that should get more respect.

Mel Young, an executive vice president in the Norwalk, Conn., office of Reinsurance Group of America Inc., said he believes life reinsurers are still thought of as if they were property-casualty companies that are doing the same things that got the p-c companies into trouble.

But one of the reasons that life reinsurers have not suffered as badly as the p-c reinsurers is that New York has made life reinsurers adhere to tough requirements, Young said.