Reinsurers reviewing capital-management plans.The volatility of the property/casualty pricing cycle has increased the cost of capital and changed the perception of the average investor toward the industry, Thomas Hurliman, managing director of Zurich Financial Services Zurich Financial Services Group is a major financial services group based in Zurich, Switzerland. Global operations North America The US consumer market is served primarily by Farmers Insurance Group the third largest personal lines property & casualty insurance Group, said at the Baden-Baden 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. Symposium in October. Hurliman said that perceptions among investors that the reinsurance sector is volatile actually have increased as the industry has unveiled more of its workings in an effort to become more transparent. "If we could reduce the volatility," he said, "the cost of capital would go down for both the insurer 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. ." A beneficial side effect, Hurliman suggested, would be improved stockmarket performances by both insurers and reinsurers. Zurich, Hurliman said, spent $8.5 billion on reinsurance in 2003, making it the second-largest buyer of reinsurance in the world. "We use reinsurance as a substitute for capital," he said. This purchasing program, Hurliman said, involves a highly centralized approach and careful monitoring of the performance of the reinsurers. Different categories of risk--short-tail, long-tail, geographic--are allocated according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the positioning and strengths of the individual underwriters on Zurich's approved list Approved list A list of equities and other investments that a financial institution or mutual fund is allowed to invest in. See: Legal list. approved list See legal list. of reinsurers. Michael Handler, chief executive officer for continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. with broker Guy Carpenter & Co., said that reinsurers burdened by legacies may find it increasingly difficult to attract investors' support. He said the industry as a whole already is feeling pressure to return excess capital to shareholders. "Mismanagement mis·man·age tr.v. mis·man·aged, mis·man·ag·ing, mis·man·ag·es To manage badly or carelessly. mis·man  age·ment n. of capital will not be rewarded," he said. Clement Booth, chairman and chief executive officer of Aon Re International, said that reinsurers continue to face asset-related risk. He noted the move in recent years from equities to bonds. "How much capital does a reinsurance company need?" Booth asked, then answered, "More than you think at the time." Bob Yates, head of European research in the property and casualty insurance research group at stockbrokers Fox-Pitt, Kelton in London, warned that the "prohibitive" cost of capital is making the insurance industry less attractive to investors. Yates cited low investment returns, the growth of regulation, the aftereffects aftereffects after npl → Nachwirkungen pl of the equities bear market and continuing weak bond yields. Yates added that claims reserves still are being rebuilt. "The investor is not giving you credit for putting your house in order," Yates said. |
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