Reinsurance rates up 40% for credit insurers

by David Masters

Story link: Reinsurance rates up 40% for credit insurers

Insurance broker Willis International has revealed that the price of one of the main types of reinsurance for European credit insurers rose by an average of 40% on 1st January.

In a report published on Friday, Willis chairman James Vickers warned that rising reinsurance costs will make life difficult for credit insurers.

The report said that many reinsurers are reducing the cover available to credit insurers, with some smaller reinsurers removing all cover from the credit insurance market.

As such, reinsurance cover will become ‘very scarce’ whilst conditions will remain ‘very tough for buyers’.

Reduced reinsurance cover for credit insurers will become a problem for European supply lines if credit insurers choose to cut the cover they offer to suppliers against the risk of purchasers going bankrupt.

Willis also revealed that reinsurance prices are rising across the insurance industry, with further increases expected throughout 2009.

Insurers with portfolios in the US, plagued last year by hurricanes, have seen reinsurance costs rise by an average of 15%. In other regions, the average increase has been 5%.

Heavy payouts from catastrophes in 2008 alongside severe losses on investments in stocks and shares have reduced the capital available to reinsurers, making them more reluctant to underwrite risk.