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IAIS report shows resilient reinsurance sector following a year of unparalleled natural catastrophes

The Global Reinsurance Market Report 2006, published on 28th November 2006 by the International Association of Insurance Supervisors (IAIS), reviews the financial health of the reinsurance sector following events in 2005, an exceptional year for the market with unprecedented levels of natural catastrophe losses. The report, based on global reinsurance statistics for 2005, covers a high proportion of reinsurance activity worldwide.

Windstorms in the United States during August and September 2005 had a considerable impact on the sector. Despite enormous losses, the global reinsurance market statistics show that the reinsurance sector proved resilient, with no major failures as a result. The market has reacted in a number of different ways to the events, including: re-pricing of US catastrophe risk, reappraisal of risk management tools and how they are used by reinsurers, an increase in the capital markets’ appetite for (re)insurance risk and a greater focus on the benefit of diversification.

Julian Adams, Chairman of the IAIS Reinsurance Transparency Group which produced the report, commented: "The reinsurance sector has shown considerable resilience in the face of two years of higher-than-expected natural catastrophes. Even so, there is still potential for under-provisioning, under-pricing, major latent casualty exposures and natural catastrophes worldwide, all of which have the potential to pose significant challenges for reinsurers' solvency and risk management capabilities. The reinsurance industry assumes risk from all parts of the insurance market, with risk and exposure management needing a wide focus to ensure all issues are properly understood and quantified.”

Mr Adams added that: “It has also been a significant feature that the capital markets have backed capital-raising initiatives by existing players and supported the formation of a number of new reinsurers."

David Marston, Division Chief in the International Monetary Fund, noted: “International institutions monitoring financial stability find the report useful for monitoring of the reinsurance sector and its possible impact on global financial stability.”

The report represents a continued drive by supervisors and industry in participating jurisdictions to improve the transparency of the global reinsurance industry. Supervisors from Bermuda, France, Germany, Japan, Switzerland, the UK and the US provided the input to the statistics covering information on 56 significant reinsurance entities representing a high proportion of the reinsurance market. Also, the report benefited from significant input by the reinsurance industry.

The 2006 report is the third report on reinsurance transparency published by the IAIS. The Reinsurance Transparency Group will continue to monitor developments in risk-oriented disclosures by internationally active reinsurers as well as considering potential development of the framework for producing the statistics.

(This is the press release by BIS Press & Communications)

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