Opinion: The Reinsurance Market Needs More Distribution, Not Less

August 14, 2013 by Mike Schnur

It is a well-known axiom that for free markets to exist, access must be unencumbered. The more players there are, the more efficient a market will be.Executive SummaryCommenting on the state of the reinsurance brokerage industry, TigerRisk’s Mike Schnur explains why he believes a lack of competition is hurting the industry and advocates that primary carriers demand innovative reinsurance solutions from intermediaries, which recognize each carrier’s uniqueness and individual needs.

Executive Summary

Commenting on the state of the reinsurance brokerage industry, TigerRisk's Mike Schnur explains why he believes a lack of competition is hurting the industry and advocates that primary carriers demand innovative reinsurance solutions from intermediaries, which recognize each carrier's uniqueness and individual needs.

Unfortunately for those of us in the reinsurance space, we have entered into a period of reduced competition. In fact, many would argue that reinsurance distribution is significantly less efficient than it was only a few years ago.

Why?

There are many reasons, but one reason eclipses all others. Today, 80 percent of reinsurance premium goes through just three big brokers. Economists call this unnatural state of affairs an oligopoly. Oligopolies disrupt the marketplace by limiting competition. When choices are limited, prices go up—and service goes down.