Several large UK cedants are reducing their spending on facultative reinsurance, according to the view taken by Vanessa Macdonald-Smith, team leader at facultative reinsurance broker, Faber Global, a division of Willis.
Writing on Willis Wire, she noted a variety of reasons for cedants taking this approach. “Some could have found that the outlay spent on facultative premium outweighed the return they earned on claims. Others might have found that their facultative spend was in conflict with or duplicated their treaty spend. One cedant also went through a major restructuring which altered the sign-off procedure for facultative reinsurance purchases,” she wrote.
According to Macdonald-Smith, the focus for many cedants has changed, too. Most are now more concerned with retained premium income and much less on using facultative reinsurance as an underwriting tool. Cedants want to be confident of the business they write in the first instance, using facultative purchases to enhance, rather than drive the underwriting position.
“So, is this approach working?” she queried. “Only time will tell.”
Source: Faber Global/Willis