VILLNET: Reinsurers went through crisis without any need for recapitalization or State aid

12 September 2012 —
montecarlo"The reinsurance industry has suffered many major events which had a strong impact on reinsurers but only in terms of results (Andrew, WTC, Katrina)", stated. Francois VILLNET, Chairman of APREF, during the RSV official press conference in Monte Carlo.

One year later contrary to what happen in the past, no traditional new reinsurance company has emerged due to the fact that companies through new capital have found alternative ways of investment. Resulting in 2012 the lost capital to be recovered and share buy-backs have resumed.

Momentarily the reinsurance market has succeeded in managing the crisis without any need for recapitalization or State aid. Yet, some governments on account of their budget deficits might be tempted to increase taxation, which would obviously handicap reinsures established in the countries concerned.

Financial earnings are affected by the drop in interest rates in the instability of the financial markets. Since government bonds offer poorer security and lower yields than before, investors are looking for alternatives so as to maintain quality and income.

In a context where earnings from investments are low, any increase in inflation would have a negative impact on reserves. On the other hand, a sharp increase in interest rates would have an impact on equity capital.

Share |