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MONOLINE REINSURERS DIVERSIFY AS CORE BUSINESS EBBS, FITCH SAYS -- FITCH FINANCIAL WIRE --

 NEW YORK, June 21 /PRNewswire/ -- Primary bond insurers ceded less business to the two top monoline reinsurers, Capital Re and Enhance Re/Asset Guaranty, in 1992, reducing the percentage of new business reinsured and increasing the use of international multiline reinsurers, a new Fitch study shows. This, coupled with an anticipated decline in municipal volume after 1993, drove monoline reinsurers to accelerate development of other business lines, such as primary bond insurance and mortgage reinsurance.
 The study was published today in a new Fitch report, "Reinsurers Shrinking Pie." It shows that primaries ceded only 18.8 percent of direct premiums written to reinsurers in 1992, down from 23.4 percent in 1991. They also ceded more to the international multilines. Therefore, despite a $288 million, or 38 percent, increase in direct premiums written, premiums ceded by the primaries to Capital Re declined $5.1 million, or 8.5 percent, and premiums ceded to Enhance Re/Asset Guaranty declined $140,000, or 0.3 percent.
 Premiums ceded and retroceded to the four most active international multiline reinsurers - AXA Re, Tokio Marine and Fire, Winterthur, and Aachen Re - increased $29 million, or 87 percent. Monoline reinsurers' market share dropped despite the exit of several Swedish reinsurers and Connie Lee's reduced reinsurance participation.
 Municipal volume is expected to flatten or decrease after 1993 due to a drop in refundings. The primaries' penetration of the municipal market may increase to more than the 1992 level of 34 percent. However, it probably will not fully offset the decrease in volume.
 In response to the declining trend, monolines stepped up development of additional business lines. In 1992, $39.2 million, or 28 percent of the combined gross premiums written by Capital Re and Enhance Re, came from sources other than primary bond insurers - well above 1991's $16.2 million (12 percent) and 1990's $2.7 million (3 percent).
 Capital Re now underwrites specialty lines of business, such as mortgage reinsurance, and assumes business from some of its international retrocessionaires. Meanwhile, Asset Guaranty, a sister company of Enhance Re, has increased its activity in the primary market, where it writes mostly small, low investment-grade business that the primaries avoid because the credits do not meet their underwriting criteria or require too much underwriting effort per premium dollar. Asset Guaranty also underwrites export credit and coal mining reclamation bonds.
 -0- 6/21/93
 /CONTACT: David Litvack, 212-908-0593, Brady N. Tournillon, 212-908-0519, or Mark H.S. Cohen, 212-908-0512, all of Fitch/


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WB -- NY079 -- 4175 06/21/93 16:29 EDT
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Publication:PR Newswire
Date:Jun 21, 1993
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