Reinsurance: small players find nicheBy Hubert Roy | October 24 2010 07:37PM
Even if three players continue to dominate the Canadian life reinsurance market, A.M. Best believes that smaller companies can still make room for themselves and find business opportunities.
The ratings agency expressed this opinion in its recent report on the Canadian life insurance industry. At the moment, 90% of the Canadian life reinsurance market is held by RGA, Swiss Re and Munich Re.
RGA is the number one player in facultative insurance, while Munich Re dominates the group market. As for Swiss Re, its share is in-force individual insurance business.
Despite this dominating presence in the main market segments, A.M. Best believes that there are still business opportunities for small players. The ratings agency points out that several are already active and cites, among others, the Canadian arm of the French reinsurer SCOR. While previously this firm focused on reinsuring sickness and accident risks, recently it has seen modest growth in the group market. A.M. Best says the reinsurer also reported a gain when it bought Revios' business.
The ratings agency points to the case of Optimum Re as well. A.M. Best notes that the Montreal-based reinsurer has established business relationships with most life insurers in Canada, and that it has successfully grown its client base despite concentration in the market. In the past, most of Optimum Re's business was concentrated in Quebec, but now most of its premiums and in-force business is outside of the province.
Lastly, A.M. Best holds up the example of Aurigen Re. Even if the reinsurer has less than 1% of the Canadian life reinsurance market, A.M. Best believes it has the capacity necessary to grow. The ratings agency notes that Aurigen Re has purchased several blocks of business, one in mortality and one in term, and says it has extensive service capacity.
In addition, A.M. Best reveals that the risk transfer rate from insurers to reinsurers remains between 25% to 30% for business generated, depending on the type of product. However, this situation could change because of regulatory changes in the Canadian life insurance industry.