Should insurance agents care whether an insurer is underwriting responsibly? In a recent opinion piece, an insurer not only says yes, but makes the point that insurers heavily utilizing reinsurance should be avoided (see here). Key point:
The question is, if the carrier can’t or won’t “eat its own cooking” – that is, own its gross
underwriting result – why would a buyer feel good about buying that carrier’s insurance product?
While the article concedes that reinsurance has a reason for being, it takes issue with those insurers who are overly dependent:
Reinsurance helps carriers create artificial spread of risk within portfolios, reduce volatility in high-severity lines, spread catastrophe risk, manage financial results, grow business with smaller surplus requirements, and enter new and untested markets/products. These are all legitimate, appropriate uses for reinsurance. But it’s a matter of degree.
Our take – its not that simple. There are poor underwriters that heavily utilize reinsurance and poor underwriters that don’t – both types need reinsurance. And poor underwriters will lose their reinsurance support if they consistently produce losses regardless of whether they are heavy users of reinsurance.
Insurance agents know. Most insurance agents writing more than one or two pieces of business with a particular underwriter know when those underwriters are incompetent. Over time, it is best to avoid these underwriters – they can’t last forever. However, there are some underwriters that insurance agents must use or they will lose the business. Balance is the key.
eSpecialty Insurance is your specialty insurance expert. We have developed a streamlined marketplace to provide multiple proposals from a range of competitive insurers, along with expertise to help you evaluate your exposures and choose the best combination of comprehensive coverage and price. We look forward to working with you.
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