There is a global increase in the utilization of healthcare services, according to a new report from ratings agency, AM Best. “The prospect of increasing medical inflation has potential to expand the role of health reinsurance,” they state.
Entitled Changing Trends Continue To Push Up Demand for Health Reinsurance, the report adds that health reinsurance premium levels continue to rise globally, but the pace has moderated in the past three years.
Emerging markets
AM Best’s director, Doniella Pliss adds that emerging markets, particularly in Asia, continue to generate material growth in health reinsurance premiums. “Health insurance remains one of the faster growing segments in the global insurance industry and accounts for approximately half of the premiums generated,” she says, but adds that the role and volume of health reinsurance is still relatively modest compared with other reinsurance segments.
That said, AM Best adds that despite recent fluctuations in premiums and profitability levels, global reinsurers continue to view the health segment as an important part of environmental, social and governance (ESG) and sustainability initiatives.
In addition, they say the growing exposure to high-cost claims has been another trend prompting demand for reinsurance.
“It has been ten years since the Affordable Care Act removed the lifetime caps on individuals’ medical claims and the industry has seen continuous growth and wider adoption of more expensive medical interventions,” they write.
Claims over $1-million
They add that Sun Life’s most recent high-cost claims report found that the number of members with claims above $1-million (all figures in U.S. dollars) increased 50 per cent in 2023. Claims above $3-million also doubled in 2023 over 2022 figures. In 2023, 28 per cent of claims over $1-million were for children under the age of two.
They also note that some treatments are not a cure, meaning once the condition is diagnosed, the catastrophic costs may continue for several years, if not for the rest of the individual’s lifetime. “The industry now has had several years to prepare for the possibility of more active utilization of these therapies,” they warn.
