Comment - Making progress.

(From Reinsurance)

By Edmund Megna, vice-chairman of Guy Carpenter.

Never before in the history of reinsurance has the role of the reinsurance intermediary been tested as it has over the last several years.

In the 1990s, the reinsurance market was soft, rates were affordable, coverage was broad and limits were high. Intermediaries generally did not have much difficulty meeting their insurance company clients' needs for reinsurance protection. In the soft market, intermediaries needed to determine the most appropriate programme for their clients and place that programme at the most advantageous rates, consistent with the clients' wishes on market security.

This cycle began to turn in early 2000. Steady development of historical reinsurance losses, such as asbestos and generally poor economic conditions, slowly pushed reinsurance prices higher until the events of 11 September 2001 caused them to skyrocket. As reinsurers began to shy away from perils that they were unable to quantify, reinsurance terms and conditions became more restrictive.

The assistance of intermediaries is invaluable in this environment. Insurers are seeking coverage for the risks they face. The challenge to intermediaries is to analyse these risks, package them in the most commercially feasible manner, and then seek appropriate risk partners to share these risks.

Through knowledge of new and alternative solutions, and access to capacity around the world, the best intermediaries work to ensure that their clients have the type of reinsurance protection that they need.