In the past 12 years, only eight reinsurers have been declared insolvent despite paying 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.
These insolvencies represented less than one percent of global reinsurer capital.
Further, those declared insolvent still managed to settle 99 percent of their outstanding obligations.
These observations are from Aon Benfield, a global reinsurance intermediary and capital advisor, which has released a report that assesses the creditworthiness of the global reinsurance industry.
The report, Credit Risk of Property Catastrophe Reinsurers, examines the credit quality of reinsurers since 2000.
According to Kelly Superczynski, Aon Benfield head of global rating agency advisory, in 2011 alone, the industry was hit with $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. Despite this loss experience, reinsurance capital stood at $455 billion at the end of 2011 – virtually unchanged from the end of 2010, the Aon anlyst said.
“This level of resilience highlights that reinsurance is one of the most secure and accretive forms of capital available in the global marketplace. As risk analysis tools and capital management techniques become ever more comprehensive, this level of security should continue to improve,” said Superczynski.
The study examines reinsurers’ payment track record and the structural, rating agency, market disclosure, and management processes in place to give cedents confidence that their future claims will be paid.
Aon Benfield released the report at the annual Reinsurance Rendezvous meeting in Monte Carlo.
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