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Industry Loss Warranties Bolster Cat Reinsurance

Appeal of tailored coverage for buyers, low-cost investments for sellers fuel

By Stephen Breen | Updated on July 16, 2006

Despite the infusion of significant new capital, there is a major shortfall in the availability of catastrophe reinsurance capacity in the United States today–a shortfall that will be more apparent during the 2007 renewal season.

The scale of the current capacity crunch is unprecedented. The last major shortage occurred following Hurricane Andrew in 1992. That episode saw the birth of alternative catastrophe products, which today represent almost 10 percent of the catastrophe limits purchased.

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