REINSURANCE SECTOR TO GET LEANER, MEANER, SURVEY SAYS

REINSURANCE SECTOR TO GET LEANER, MEANER, SURVEY SAYS

The reinsurance industry will experience further consolidation, according to a study released by a Hartford, Conn.-based research and investment firm.

The strategic report, published late last month by Conning & Co., also posits that the quality of a reinsurer is no longer measurable by the size of its capital base, but by the quality of services it offers."In years past, reinsurer quality was exclusively a function of the size of its capital base," says the report. "Today quality goes beyond size alone. In addition to size, primary insurers are looking to reinsurers for creative value-added services."

The Conning study, "Outlook for the Reinsurance Industry - A New Definition of Quality," sees more consolidation ahead in the industry as fewer reinsurers are able to meet the new standards.

"Due to the enormous volume of capital raised by the industry in recent years, many reinsurers have vaulted above the $150 million to $200 million capital threshold that by current standards defines 'large' in the industry," the report continues.

Primary insurers are looking to their reinsurers for innovative ideas in order to integrate reinsurance considerations into their company's overall

financial strategy, the report goes on. This might include substituting reinsurance for capital.

Primary companies will seek out reinsurers that meet a new ''multidimensional definition of quality," and as a consequence those reinsurers will earn consistently superior returns.