S&P’s new capital model has meaningful implications on insurers’ reinsurance purchase decisions. Given changes to debt-funded capital credit and other capital adjustments, generally higher underwriting capital factors, enhanced diversification benefits, and varying natural catastrophe return period requirements, insurers should re-assess the cost/benefit of their current reinsurance programs. Capital relief structures such as quota shares and legacy covers that target capital intensive lines of business as well as increased catastrophe limit may offer substantial S&P capital relief.

S&P Capital Model Update

S&P’s new capital model has meaningful implications on insurers’ reinsurance purchase decisions. Given changes to debt-funded capital credit and other capital adjustments, generally higher underwriting capital factors, enhanced diversification benefits, and varying natural catastrophe return period requirements, insurers should consider whether to re-assess the cost/benefit of their current reinsurance programs. Capital relief structures such as quota shares and legacy covers that target capital intensive lines of business as well as increased catastrophe limit may offer substantial S&P capital relief.

Learn more about these changes here (opens a new window)

Contacts

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Paul Hyer

Ratings Advisory Lead
phyer@lockton.com
+1 612 219 8170

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John Mercer

Business Intelligence Lead
jmercer@lockton.com
+1 646 530 1803

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