RAA Releases 2006 Statistical Report on Offshore Reinsurance in the U.S.

July 18, 2007

In 2006, total U.S. premium ceded to offshore reinsurers was $54.7 billion and ceded recoverables totaled $114.2 billion, according to a report released by the Reinsurance Association of America (RAA), “Offshore Reinsurance in the U.S. Market: 2006 Data.” That represents an 11.9 percent decrease in premiums and a 7.8 percent decline in recoverables since 2005.

Offshore companies’ share of U.S. unaffiliated reinsurance premium increased to 53.1 percent in 2006 from 51.8 percent in 2005, while the market share of offshore companies and U.S. subsidiaries of offshore companies decreased to 84.5 percent of U.S. unaffiliated reinsurance premium in 2006 from 85.4 percent in 2005, the report said.

Total premiums ceded to affiliated offshore reinsurers decreased by 16.3 percent from the previous year to $32.5 billion while net recoverables due from affiliated offshore reinsurers increased by 2.8 percent to $70.4 billion. The largest markets for unaffiliated premiums ceded and recoverables due in 2006 were Bermuda, United Kingdom and Ireland, Germany, the Cayman Islands, Switzerland, and Barbados. Premiums ceded to unaffiliated offshore reinsurers decreased by 4.4 percent to $22.2 billion while recoverables from unaffiliated offshore reinsurers decreased 21.0 percent to $43.8 billion.

Data indicates that nearly 2,300 offshore companies assumed U.S. premium in 2006 and that over 4,200 offshore companies from 95 jurisdictions either assumed U.S. premiums or had reinsurance payables due to U.S. companies. This data suggests that the current U.S. regulatory environment and 100 percent collateral requirements for unauthorized reinsurers is not a significant barrier for offshore companies as they account for more than half of the U.S. unaffiliated reinsurance market, the RAA says.

An offshore company can participate in the U.S. market by becoming licensed in the states in which it does business, by establishing a U.S. affiliate licensed in the states in which it does business, or by posting collateral in the U.S.

“Offshore Reinsurance in the U.S. Market: 2006 Data” presents statistics that demonstrate the expanding role of alien companies in the U.S. reinsurance market. It is especially important in light of the current public policy debate regarding the reduction in collateral requirements for unlicensed, unauthorized reinsurers that are not subject to U.S. regulatory and solvency requirements. The outcome of this policy debate could have significant implications to the solvency of U.S. companies, as reinsurance recoverables from offshore companies continue to increase, says the RAA.

The report is prepared based on ceded reinsurance as reported in Schedule F, Part 3 data filed with the National Association of Insurance Commissioners (NAIC), and presents statistics on U.S. premiums ceded to, and net recoverables from, more than 4,200 reinsurers in 95 jurisdictions outside the U.S. Additionally, the report ranks offshore jurisdictions with the largest participation in the U.S. market for both affiliated and unaffiliated reinsurance business, and provides historical market share trends of U.S. reinsurance companies versus offshore companies.

The RAA has reported annual statistics on offshore participation in the U.S. market in its report Offshore Reinsurance in the U.S. Market since 1990. The objective is to provide policymakers and the public with data and analysis about the U.S. reinsurance market.

The Reinsurance Association of America (RAA), headquartered in Washington, D.C., is a non-profit trade association of property and casualty reinsurers and reinsurance intermediaries. RAA underwriting members and their affiliates write more than two-thirds of the gross reinsurance coverage provided by U.S. professional reinsurance companies.

Source: Reinsurance Association of America, www.reinsurance.org

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