by: The Reinsurance Study Group
2006, 115 pages
Type: Special Report
ISBN: 1-56708-132-0
Price: $50.00
Keywords: Banking, Securities, Reinsurance
Electronic PDF:
Hard Copy:
The Group of Thirty organized this study on Reinsurance and International Financial Markets to highlight a number of major issues which have arisen as new players enter the international markets on a substantial scale. Financial activities formerly undertaken in the separate worlds of banking, securities and insurance today increasingly overlap. Just as dividing lines between commercial and investment banking have become blurred in recent decades, the evolution of derivatives markets has shifted a range of financial risks into the capital markets. The result is that non-bank financial institutions, including reinsurance companies, now play an increasingly important part in the overall redistribution of risk.
In the light of these challenges and associated concerns about the stability of the global reinsurance industry, the Group established a Study Group to explain the nature of the reinsurance sector, delineate good industry practices, and assess the degree to which the reinsurance industry poses a systemic risk to the wider financial system. Where appropriate and, if necessary, the Study Group was asked to make recommendations to address these concerns.
The report is divided into two parts. Chapters 1and 2 set out the role of reinsurance, identify the key elements of good reinsurance practice, and summarize the main structural features of the industry and the factors driving its performance. Chapters 3 through 6 review and discuss in detail four issues of crucial importance to the industry:
(1) The extent to which the reinsurance industry is a potential source of systemic risk for the financial system as a whole, and hence the real economy
(2) Whether the securitization of insurance risks through the capital markets
offers an opportunity to meet the growing demand for reinsurance by supplementing
capacity provided through traditional reinsurance treaties
(3) The appropriate framework for disclosure of reinsurance risks in a
manner which could improve the transparency of the industry
(4) The extent to which the current reinsurance regulatory regime is adequate
and, if not, how it might be improved.
The report secured significant press coverage and is now recognized as
an important primer for those interested on how reinsurance works and the
level of systemic risk that may or may not attach to the industry. Since
the publication of Reinsurance and International Financial Markets, we
are pleased to observe that market participants continue to build on the
report’s recommendations, in particular as regards the desirability
of the increased use of securitization by the industry.