CCR Group, a leading French reinsurer, has circulated a letter informing its partners in New Zealand, Australia and Thailand to stop writing business with the company in order to ensure its long-term profitability for the benefit of shareholders.
The letter, sent on Monday by the head office in Paris, said the group had conducted a thorough strategic review of the global positioning of its open-market reinsurance book of business.
It said that during the review, it had become obvious that the group had to refocus CCR’s limited resources on key targets.
Diversification is right as long as the portfolio is not too scattered, the reinsurer said in the letter.
In the context of the high frequency of severe natural-catastrophe losses that occurred in Asia over the last 12 months, the company has decided to limit the number of countries where it operates business in order to better serve the group’s clients, ensure professional risk management and long-term profitability for the benefit of the shareholders, the letter said.
Therefore, CCR’s activity in Asia will be reduced in 2012 by stopping writing business in Australia, New Zealand and Thailand, with immediate effect, the letter concluded.
A source from a Thai insurance company described CCR as a major reinsurer focusing on Asia, including Thailand. It is estimated to have 10 per cent of reinsurance business in Bangkok.
The company’s withdrawal from Thailand will not, however, have much effect on Thai insurance companies, as there are new reinsurers in the market that can step in to replace it, the source said.
Operating business in Thailand since 2001, the group’s first big loss in the Kingdom was to pay claims resulting from the tsunami in 2004.
Several severe natural disasters in New Zealand, Australia and Thailand this year have also caused huge losses.
“The worst floods [in 50 years] in Thailand alone would cause the payment of claims of Bt10 billion from the government’s total estimated losses of Bt400 billion,” said the source.
The most important factor for reinsurers to consider is whether to change their appetite for Thailand from a general risk country to a natural-disaster risk approach.
If they opt for such a change, they will not only introduce stringent policy conditions but also increase insurance premium in order to ensure risk coverage, the source added.
Source: The Nation