Nonstandard Business Fuels Growth In Auto Reinsurance

19 October 1998

Nonstandard Business Fuels Growth In Auto Reinsurance

    OLDWICK, N.J.--Oct. 16, 1998--Automobile insurance is the largest segment of the U.S. property/casualty industry and among the most profitable. However, less than 20% of the segment's more than $133 million in premiums written last year was reinsured.
    That may be beginning to change, according to an article in the October property/casualty edition of Best's Review. Higher-priced nonstandard policies-those written for drivers with poor risk characteristics-are drawing new reinsurance players into the market. Companies such as American Re and Underwriters Re have increased their stakes in recent years.
    "Pricing and results in personal auto have been very strong," says Gregory Doyle, president of American Re's domestic insurance company operations division, "and our industry has been a large beneficiary of that."
    Underwriters Re did not target auto reinsurance as a growth area when it entered the market three years ago. But it recently solidified its stake by buying a 35% interest in one of its nonstandard auto clients.
    Risk Capital Reinsurance also became involved in auto reinsurance through its investment in a nonstandard auto insurer, Best's Review says.
    Industry experts expect auto reinsurance to remain intensely competitive over the next 18 months, according to Best's Review. One evolving concept that may make it more profitable is managed care for physical damage. Many companies have encountered problems with the physical damage portion of their business.
    "To be able to direct companies to repair shops is still in its early stages," says American Re's Mr. Doyle, "but it should allow us as an industry to be more efficient providers, more efficient on claims handling."
    Best's Review is published monthly by A.M. Best Co. Members of the media can obtain a copy of this article in its entirety by calling Jeffrey Dunsavage, (908) 439-2200, ext. 5618. All others should call Customer Service at (908) 439-2200, ext. 4557.
    A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.