what's trending in life reinsurance
Post on 24-Jan-2015
161 Views
Preview:
DESCRIPTION
TRANSCRIPT
© Oliver Wyman CONSULTING ACTUARIES
WHAT’S TRENDING IN REINSURANCE?2014 Valuation Actuary Symposium
August 25, 2014
Alberto Abalo FSA, MAAA, CERAPrincipal
2© Oliver Wyman 2
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
% Reinsured 0.615 0.597 0.562 0.47 0.399 0.361 0.352 0.342 0.302 0.275 0.261 0.272
Amt. Reinsured 1078 1043 1037 844 724 683 658 596 505 461 446 443
Amt. Retained 674.84552845528
5
705 809 952 1089 1207 1212 1148 1168 1218 1260 1185.6764705882
4
100
300
500
700
900
1,100
1,300
1,500
1,700
1,900
Cession rates have been on the decline…
U.S
. Bill
ion
sU.S. ordinary individual life insurance sales
Source: Society of Actuaries Life Reinsurance surveys, conducted by Munich American Re
3© Oliver Wyman 3
2011 2012 2013
% Reinsured 0.275 0.261 0.272
Amt. Reinsured 461 446 443
Amt. Retained 1218 1260 1185.67647058824
100
300
500
700
900
1,100
1,300
1,500
1,700
…but the market appears to have reached equilibriumConsistent level of new business 2011 - 2013
U.S
. Bill
ion
sU.S. ordinary individual life insurance sales
Source: Society of Actuaries Life Reinsurance surveys, conducted by Munich American Re
Year-over-year increase in
cession rates for the first time in
11 years
44© Oliver Wyman
What’s trending in reinsuranceTweets from the streets
1 #M&AReinsurance market consolidation continues
M&A activity is strong
2 #PE #AnnuityRe Private equity / alternative buyers getting into the insurance game, reinsuring annuities
3 #ShadowInsurance Captives under scrutiny
4#Longevity #BigData #Analytics #Pandemic
Other trends include: Automated UW, pension de-risking, emerging markets, pandemic reinsurance, …
#M&AMarket consolidation and M&A
1
6© Oliver Wyman 6
Rest of Market4% General Re Life
3%
Hannover Life Re11%
Munich American Re15%
RGA Re19%
Swiss Re20%
SCOR Life Re28%
Rest of Market5%
General Re Life3%
Transamerica Re15%
Munich American Re12%
RGA Re22%
Swiss Re12%
SCOR Life Re3%
Generali USA Life Re7%
Scottish Re (US)16%
Canada Life5%
US Individual Life reinsurance market shareThen and now
2005 market share 2013 market share
Source: Society of Actuaries Life Reinsurance surveys, conducted by Munich American Re
Top 5 as % of total20132005
77% 93%
1 2 3 4
7© Oliver Wyman 7
Acquisition activity by primary insurers and reinsurersAcquirer/Seller (Date)
1 2 3 4
8© Oliver Wyman 8
Forces driving M&A activitySuccessful deals have been driven by asymmetries of views and/or exposures
Motivations to Invest / Divest
Regulatory requirements and accounting standards
Risk and capital issues
Products
Low interest rates
1 2 3 4
#PEPrivate equity / new market entrants
2
10© Oliver Wyman 10
Private equity firms and alternative buyers are driving annuity M&A activityAcquirer/Seller (Date)
1 2 3 4
#ShadowInsuranceCaptives under scrutiny
3
12© Oliver Wyman 12
Use of captives to blame for dropping cession rates?
Source: A.M. Best; Koijen & YogoAvailable at http://www.economist.com/news/finance-and-economics/21589917-american-life-insurers-are-less-robust-they-seem-life-shadows
1 2 3 4
13© Oliver Wyman 13
“Shadow Insurance”Captives under scrutiny
Use of term shadow insurance, echoed in the popular press, conflates use of captives with the banking practices that led to the 2008 financial crisis
DFS report attacks “regulatory race to the bottom” leading to artificially rosy capital buffers for insurers and putting policyholders at greater risk
• Conditional letters of credit• Two-step transaction• Hollow assets• Naked parental guarantees
“State insurance commissioners should consider an immediate national moratorium on approving additional shadow insurance transactions.”
– NY State Dept of Financial Services (June 2013)
1 2 3 4
Other trends4
15© Oliver Wyman 15
Automated underwriting
Problem: Middle market
• Convenience
• Faster turnaround
Solution: Rules engines
• Automated underwriting
• Straight-through processing
Byproduct: Predictive Analytics
• Big data
• Predictive underwriting
1 2 3 4
16© Oliver Wyman 16
Longevity reinsurance
Size Cedant Insurer / swap provider Reinsurer
Jul 2014 £16bn BT BT Pension Scheme Prudential
Mar 2014 £5bn Aviva Aviva Life & Pensions Munich Re, Swiss Re, Scor
Dec 2013 £3bn AstraZeneca Deutsche Bank
Feb 2013 £3bn BAE Systems Legal & General Hannover Re
Nov 2011 £3bn Rolls-Royce Deutsche Bank Prudential, Scor, Pacific Life Re
Feb 2010 £3bn BMW Abbey Life Consortium including Hannover Re, Pacific Life Re and Partner Re
Source: Trading Risk, RGA
1 2 3 4
17© Oliver Wyman 17
Source: National Institute for Allergy and Infectious Diseases (NIAID)
Pandemic reinsurance
33%of deaths worldwide are caused by infectious diseases
1 2 3 4
18© Oliver Wyman 18
Other trends on our radar
2020+ 2020+2015 201520102010
Growth in Asia & Latin
America
Large inforce deals
Financial reinsurance
Combo Products
1 2 3 4
1919© Oliver Wyman
Reports of my death have been greatly exaggerated.
Mark Twain
top related