In a new report assessing the creditworthiness of the global reinsurance industry, Aon Benfield notes that in the past 12 years only eight reinsurers have gone bust, despite claims of more than $150 billion from events including the World Trade Center attacks, hurricanes Rita, Wilma and Katrina, the Great Tohoku earthquake, and the Thailand floods.
Since 2001, insolvencies in the sector amount to less than 1% of global reinsurer capital and where firms have been declared insolvent, they still managed to settle 99% of their outstanding obligations.
According to Aon Benfield, this level of resilience shows that reinsurance is one of the most secure and accretive forms of capital available in the global marketplace.
The firm’s head of global rating agency advisory, Kelly Superczynski, comments: “In 2011 alone, the industry was impacted by $105 billion of insured losses across 253 separate events, with a significant amount of this risk ceded to the reinsurance industry – more than in 2005.”
She adds: “Despite this loss experience, reinsurance capital stood at $455 billion at the end of 2011 – virtually unchanged from the end of 2010.”
As risk analysis tools and capital management techniques become more comprehensive, Ms Superczynski expects this level of security to continue to improve.
The study also examines reinsurers’ payment track records and explains the structural, rating agency, market disclosure, and management processes that ensure cedents can have a high level of confidence that their future claims will be paid.