Investment income has rebounded since disastrous lows during the US and EU financial crises.
Los Angeles, CA (PRWEB) May 13, 2013
The Global Reinsurance Carriers industry provides support to direct insurance markets all over the world. In essence, reinsurers provide insurance for policies the insurance industries have written, but are subsequently unwilling or unable to accept. A primary insurer purchases reinsurance to limit its exposure, usually to one specific type of risk, thereby diversifying its book of risk. The global reinsurance market then spreads these risks across more companies and countries, thereby maximizing the spread of risk and protection against unforeseen losses. This improves the capital efficiency of the overall insurance market so that less capital is required to back any unit of risk. “In theory, this means that no insurance company accepts so much risk as to make them likely to default in the event of a major catastrophic occurrence,” says IBISWorld industry analyst Eben Jose.
Reinsurance carriers generate revenue not just from reinsurance transactions but also through investing their earned premiums. Investment revenue comprises income flows from assets plus any capital gains or losses realized from asset sales. Investment revenue is an important part of reinsurers' business because it supplements underwriting losses in bad years and typically accounts for 9.0% to 15.0% of revenue. In 2013, Global Reinsurance Carriers industry revenue is expected to increase 6.7% year on year to reach $591.5 billion, with revenue from premiums expected to account for more than 90.0% of income. This will cap off a solid performance over the five years to 2013, when industry revenue is estimated to grow at an annualized rate 6.3%. “While lower than historical averages, investment income has rebounded somewhat since hitting disastrous lows during the financial crisis that swept through the United States and Europe,” adds Jose. “In addition, demand for reinsurance is growing, as more direct insurers look to shore up their capital positions before taking on more business.”
The industry has a low level of industry concentration. Although concentration has increased slightly since the global financial crisis, it remains low. The crisis saw a number of enterprises suffer debilitating capital losses that made them targets for takeovers by the larger firms. Consequently, there has been a fall in enterprise numbers since the crisis, as these smaller, weakened firms have been absorbed by dominant players, such as Munich Re, who capitalized on the opportunity to gain market share.
Over the past five years, industry revenue growth has been resilient as the insurance markets of developing markets have continued to mature, and premium income growth has mitigated sluggish investment returns. Going forward, the industry is expected to continue to grow at a healthy rate. Developing markets will continue to be the strongest area of growth, while developed economies will pick up more slowly as the post-crisis hangover lingers. For more information, visit IBISWorld’s Global Reinsurance Carriers industry report page.
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IBISWorld industry Report Key Topics
Businesses in this industry focus on assuming all or part of the risk associated with existing insurance policies originally underwritten by direct insurance carriers. In other words, the primary activity of this industry is insuring insurance companies.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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