Shrinking life reinsurance market to stimulate risk transfer

A new report published by ratings agency Standard & Poor’s suggests that the traditional life reinsurance market has been shrinking since 2003 and now participants in this market are seeking new, non-traditional ways to stimulate growth. Another trend which is leading S&P to suggest that non-traditional risk transfer could see growth in the life reinsurance arena is the recent trend for large acquisitions in the sector.

S&P suggest in the report that as life reinsurers compete for a larger piece of this shrinking market opportunity they will increasingly turn to alternative risk transfer techniques and risk securitization type instruments to sustain long-term growth.

This thought is in line with comments from companies such as Swiss Re who have predicted a resurgence in life reinsurance securitization in the past.

As direct insurers and regulation have resulted in increasing levels of risk retention among these types of carriers, risk transfer via the capital markets or instruments such as swaps and derivatives seem like likely candidates for experimentation and offloading of risk.

The report, ‘As The Market Shrinks, Life Reinsurers Look To New Products For Growth‘, is available for Standard & Poor’s subscribers or to purchase directly from them.