Reforms Open Door For Reinsurers in Japan.Other opportunities include demutualization Demutualization The process of changing corporate structure from a mutual fund company to some other form, such as a limited liability or corporation. Notes: This means mutual/life insurance companies convert from policyholder companies to stock companies. , industry consolidation and reinsuring blocks of in-force business. The U.S. life 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, which has grown 21% over the past five years, is poised to capture more business as a result of demutualization, industry consolidation and new international markets. For example, in Japan, where only 1% of direct business is reinsured, Reinsurance Group of America Inc. recently completed a first-dollar quota-share agreement--a first for RGA RGA Reinsurance Group of America RGA Return Goods Authorization RGA Republican Governors Association RGA Residual Gas Analyzer RGA Royal Garrison Artillery RGA Restricted Growth Association (UK) RGA Rate Gyro Assembly , which President and Chief Executive Officer A. Greig Woodring termed a "breakthrough." Quota share is automatic reinsurance that requires the insurer to transfer and the 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. to accept a given percentage of every risk within a defined category of business written by the insurer. Japan is the largest life insurance market, but life insurers there were richly capitalized until the economic turmoil in the late 1990s caused the stock market to tumble, forcing the government to institute more stringent reserve requirements Reserve Requirements Requirements regarding the amount of funds that banks must hold in reserve against deposits made by their customers. This money must be in the bank's vaults or at the closest Federal Reserve Bank. . Reinsurers also can build global business by helping multinational direct writers structure their business, so tax losses in one country can be offset by profits generated in another country, Woodring said. In the United States, a growing source of new business is reinsurance for blocks of in-force business. For example, a direct writer intent on building a war chest for acquisitions might seek reinsurance to free up capital efficiently, quietly and at little cost by ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. business that has been on its books, Woodring said. Reinsuring in-force business is a strategy adopted by demutualizing companies to more accurately project earnings, he said. Reinsuring existing business could amount to 50% of the industry's business within a few years, Woodring said, noting that has happened in Canada. |
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