Panel Sees Blurred Capital Channels For Reinsurance

In the future, there will be a blurring of ways that direct writers get capital relief, a panel of executives from leading global reinsurers predicted.

There will be a broader framework in which capital markets, reinsurers and direct writers will all be able to provide ways to offer or free up capital, Wolfgang Strassl, head of the divisional unit of the life and health division of Munich Re, Munich, Germany, told attendees of ReFocus 2008 here.

ReFocus is an annual life reinsurance conference cosponsored by the American Council of Life Insurers, Washington, and the Society of Actuaries, Schaumburg, Ill.

“I wonder if it will be so definable who is the reinsurer and the direct writer?” Strassl said. This blurring has happened in the U.S. health market, he added, observing that legally, there is a distinction, but practically, the 2 are not distinguishable.

The trend is global, panelists agreed. Wolf Becke, head of the life reinsurance department of Hannover Re, Hannover, Germany, citing an example in South Africa, where a reinsurer is underwriting on behalf of a client at the client’s offices. So through outsourcing, the reinsurer is both conceptually and physically taking on the job of the direct writer, he pointed out.

The blurring of more defined capital management functions is happening in other ways, according to Becke. In the event of a pandemic, the risk “is simply too big to just take on ourselves,” he said. “We will need the capital markets in order to manage this risk properly.”

Moreover, life reinsurers are focusing on certain parts of the business now, so they do not all look alike anymore, he continued.