In uncertain economic times many firms look to cut costs. Insurance is no different, with several companies engaging in strategic reviews, as they search for efficiencies.
As a result, several major UK cedants have become more strategic in their purchasing of facultative reinsurance. This includes reducing their overall facultative reinsurance spend and no longer buying it on a capacity only basis.
There are several reasons for 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.
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? Only time will tell. The important issue for Faber Global has been to provide analytical and transactional support to cedants during this time of transition, enabling our clients to find innovative ways to spend less money, while still protecting their accounts.