Insuring the Insurer

Canadian Underwriter, July, 2007 by Harries, Jim; Kovacs, Paul; Leadbetter, Darrell

Reinsurance has long been an effective means of diversifying risk for property and casualty (P&C) insurance companies in Canada, particularly the risk of large-claim events. Nevertheless, reinsurance risk does exist and it can have important implications in determining the ultimate cost of an insolvency for member insurers.

REINSURANCE IN CANADA

The Canadian P&C industry is a heavy consumer of reinsurance products. Reinsurance, a highly complex global business, accounts for about 24% of the Canadian P&C insurance industry's direct written premiums. In comparison, reinsurance accounts for about 6% and 17.1% respectively of U.S. and Organization for Economic Co-operation and Development direct written premiums.

Reinsurance allows insurers to transfer...