Interesting article here (from the Providence Journal) which features comments from Shivan Subramaniam, CEO of FM Global, on the issues affecting their business due to the reductions in rates currently being experienced in the market.
He says that the reductions in reinsurance rates may prompt FM Global to refrain from issuing a catastrophe bond this year. He said; “Our treaties don’t renew until July, and that’s about when we will find out whether it makes sense to use the cat-bond market or just use the reinsurance market.” While a catastrophe bond provides FM Global with a guarantee of being repaid for loss events, buying reinsurance is “a lot easier to do.”He added, “If the pricing works out right and we can deal with the credit issues in terms of credit-worthiness, then we’ll automatically go to the reinsurance markets.”
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