Best’s Market Segment Report: Global Life Reinsurers Poised for Growth, But Mature U.S. Market Still Key

OLDWICK, N.J.–(BUSINESS WIRE)–Growth in the U.S. life reinsurance market has been challenged
due to limited growth by direct writers, but opportunities have taken
shape in emerging markets, particularly in the Asia-Pacific region, as
well as in legacy life/annuity blocks of business that have come to
market, according to a new AM Best special report.

Five carriers, accounting for the vast majority of assumed business,
dominate the U.S. life reinsurance market, which is in sharp contrast to
the primary life insurance market. The Best’s Market Segment Report,
titled, “Global Life Reinsurers Poised for Growth, But Mature U.S.
Market Still Key,” notes that these top-tier players have strong capital
positions and earnings that reflect disciplined pricing and mortality
experience, as well as a stable book of recurring business. Moreover,
the U.S. life reinsurance business makes up a significant share of the
European-based companies’ global life reinsurance premiums. Ultimately,
the United States remains a key market for global life reinsurers as it
constitutes the largest primary life insurance market.

However, the Asia-Pacific direct life insurance market continues to grow
faster than in developed countries, providing opportunities for life
reinsurers to assume more business. China’s life insurance market is now
the world’s second largest life insurance market. Additionally, legacy
life/annuity blocks of business also have become meaningful acquisition
opportunities for global life reinsurers, and recent acquisitions
involving second- and third-tier reinsurers highlight growing market
competition. Life reinsurers also have been able to take advantage of
more companies laying off large pension obligations, particularly
outside the United States. Pension business and other interest-sensitive
lines are benefiting from a favorable economic environment with
generally rising interest rates and a benign credit environment.

Life reinsurers remain active in providing financial solutions,
including the continued financing of redundant reserves, providing
capital management solutions to assist companies working through
regulatory and taxation changes and providing avenues to exit
underperforming books. Reinsurers view underwriting as a key area in
which to add value, offering underwriting expertise and affording direct
writers an avenue to lay off risk should actual results deviate from
pricing as a result of new underwriting processes.

AM Best believes life reinsurers must continually invest in technology
to stay competitive in a world that is rapidly changing. New digital
solutions and automated underwriting platforms are enhancing the
customer experience and enabling companies to maximize the value of
their in-force business, thus contributing to the long-term value of the
organizations. However, such initiatives come with a need for meaningful
investment, including system upgrades and the development of innovative
solutions, partnering with technology firms and harnessing the benefits
of predictive modeling.

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