Firms will expand their capacity and reinsurance structures to meet rising demand
Los Angeles, CA (PRWEB) May 17, 2013
The Health and Medical Reinsurance industry plays a vital role in maintaining the health of the insurance market. Reinsurers help health insurance carriers manage risks and protect against major medical expenses that can arise from, for example, a patient requiring an organ transplant. Similar to the overall reinsurance market, the industry felt the pinch of the recession, followed by suppressed revenue growth as a result of weakened demand from the primary health insurance market and declining investment returns. However, revenue has resurged in light of the rebounding economy, with the number of primary insurers beginning to purchase reinsurance for the first time, says IBISWorld industry analyst, Anna Son. As a result of these factors, IBISWorld estimates that industry revenue will grow at an average annual rate of 1.6% to $4.1 billion. This growth includes a 3.1% jump in 2013.
Reinsurance requires large amounts of capital because most risks requiring secondary insurance are too high for any company to underwrite alone. Although any insurance company can technically participate in the market, a small number of companies, including General Re and Reinsurance Group of America, dominate the health and medical reinsurance arena, continues Son. As a result, the Health and Medical Reinsurance industry has a high level of market share concentration. During the past five years, more insurance companies aimed to lower their risk by selling their health and medical insurance to other insurance companies. While health and medical reinsurance accounts for a small segment for a majority of US reinsurers' revenue, players in the industry aimed to expand their health segments through acquisitions. For instance, in 2010, industry leader RGA acquired Reliastar Life Insurance Company's group life and health reinsurance business. Another relatively large player in the industry, PartnerRe Ltd. acquired its competitor Presidio Reinsurance Group at the end of last year, causing its accident and health reinsurance segment to grow substantially. As a result of these acquisitions, IBISWorld estimates the number of industry operators has contracted an average 0.9% annually to 21 during the five years to 2013.
Over the next five years, health insurance and reinsurance companies will face substantial changes, as most provisions of healthcare reform will come into effect, particularly in 2014. Some key provisions of the law include the establishment of the health insurance exchange market, the elimination of preexisting condition limitations, and unlimited annual and lifetime maximums. As a result, health insurance carriers will turn to reinsurance providers for additional protection and risk management. To meet rising demand, industry operators will continue to expand their capacity and pursue alternative reinsurance structures. In addition, industry operators will look to diversify their product portfolios to mitigate fluctuations in any particular product segment. Reinsurers will also use reserves to stabilize their bottom lines. By stabilizing earnings, reinsurers will achieve stronger credit ratings and receive more favorable treatment from capital markets. For more information, visit IBISWorld’s Health and Medical Reinsurance in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes firms that assume risks originally underwritten by health and medical insurers.
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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