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Reinsurers, Cedents At Odds Over Future Loss Trends, U.S. Exec Says

Reinsurers are increasingly questioning the sustainability of a good casualty claims environment, and their dimmer views of future profit margins on primary business are putting them at odds with potential cedents.

By Susanne Sclafane | Updated on July 04, 2010

Reinsurers are increasingly questioning the sustainability of a good casualty claims environment, and their dimmer views of future profit margins on primary business are putting them at odds with potential cedents, market participants said recently.

“The expectations are different by meaningful enough amounts that you’re struggling over treaty terms, or whether you’re actually going to come to an agreement at the end of the day,” said Michael Sapnar, chief underwriting officer of domestic operations for Transatlantic Holdings in New York.

Mr. Sapnar, speaking during a panel on cycle management at the 2010 Standard & Poor’s insurance conference last month, explained that the go-forward loss picks selected by his firm typically differ with those selected by ceding insurers.

“Different [primary insurance] companies have different expectations [and] assumptions, but that is pretty consistent with almost any company–that we’re a little more pessimistic than the insurers in terms of loss cost trends, and maybe even frequency trends,” he said.

“The issue is how much credence do you want to give to negative frequency trends, or less-than-expected severity trends? Is it going to continue?”

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