Australia's Global Reinsurers Face Hard Times, A.M. Best Says.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 10, 2000 Australia's global reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. industry faces a dim future, reversing a very promising beginning, A.M. Best Co. says in the latest issue of Best's Viewpoint. Australia is a relatively new market for global reinsurance, with the first local reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. writing non-Australian business in the mid-1990s. A.M. Best says the Australian reinsurers' current difficulties are rooted in their headlong head·long adv. 1. With the head leading; headfirst: The runner slid headlong into third base. 2. In an impetuous manner; rashly. 3. At breakneck speed or with uncontrolled force. global expansion, combined with the extended soft business cycle and escalating severity and frequency of catastrophic losses. Until recently, Australian reinsurers benefited from the weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. Lloyd's market and a flow of capital and expertise to Australia.
Their location in the Asian-Pacific region was an advantage because of
their proximity to Asia and the geographical risk diversification DiversificationA risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. they offered primary insurers based in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe. In addition, a liberal regulatory environment made it easy for Australian reinsurers to write many kinds of business. More recently, however, the advantages they enjoyed as start-ups have turned into obstacles. &uot;The heady head·y adj. head·i·er, head·i·est 1. a. Intoxicating or stupefying: heady liqueur. b. growth years for the medium-sized reinsurers were short,&uot; the Viewpoint article says. &uot;The Bermuda reinsurers' expansion into the London market and the emergence of the capital market as a provider of alternative risk-transfer solutions caused the Australian reinsurers' modest size and independence to work against them.&uot; A.M. Best says the declining role of Australian reinsurers in the global market is exemplified by the experience of Minet Burn Roche, a Sydney-based reinsurance broker whose international placement business fell to $1 million in 1999 from $13 million in 1998. Best's Viewpoint is an analytical supplement to A.M. Best's weekly news publication, BestWeek. The full article--titled &uot;Australia's Global Reinsurers Face Hard Times&uot;--can be read on the Internet at www.bestweek.com/reports. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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