Rising Re Disputes May Affect Balance Sheets
We are all aware of the effect of the extended soft market on the direct profitability of insurance companies. Less well-understood is the possible impact of the soft market on the collectibility of reinsurance.
The amount of recoveries due from reinsurers has increased over the past few years. Chart 1 displays the ratio of ceded reserves to gross reserves and ceded reserves as a percentage of surplus for 10 large primary companies. (The 10 insurance companies selected for analysis had the largest ceded premium volume.)
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