Best’s Market Segment Report: Market Fundamentals Drive Growing Demand for Health Reinsurance

OLDWICK, N.J.--(BUSINESS WIRE)--The demand for health reinsurance solutions in the United States and globally continues to grow amid expensive new treatments and therapies, as well as pressure on capital associated with government business, according to a new AM Best report.

The Best’s Market Segment Report, “Market Fundamentals Drive Growing Demand for Health Reinsurance,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Additional reports, including AM Best’s annual ranking of the Top 50 global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, life/annuity and regional reinsurance markets, will be available during August and September.

Health reinsurance represents a relatively small share of premium for global reinsurance carriers, according to the report; however, U.S. carriers have increasingly turned to reinsurance to relieve pressure on capital as the commercial segment saw a downturn in profitability in 2021 and 2022 while capital-intensive government business (i.e., Medicare Advantage and Managed Medicaid) saw rapid growth. Primary carriers also are facing a rise in high-cost claims associated with innovative treatments and new therapies.

“In addition to protection from high-cost claims, more health insurers are using reinsurance to enhance financial flexibility,” said Doniella Pliss, director, AM Best. “Reinsurance allows health insurers to free up capital and use it to cover operational needs, expand vertical integration capabilities, maintain debt service and return to shareholders.”

The report notes that while health reinsurance represents a relatively small share of premium for global reinsurance carriers, the volume of ceded health premium in the United States, combined for health and life/health statutory filers, more than doubled over the past 10 years to $44.2 billion in 2022.

U.S. health insurers historically have dominated the market in premium, but emerging economies now are generating most of the premium growth due to a rapidly expanding middle class, especially in Asia, and its rising demand for better access to health care. In addition, the aging population and larger burden of chronic diseases worldwide has fueled a need for more medical services. Reinsurance continues to play an important role in supporting health premium growth in Asia.

“In response to the market demand, reinsurers have been building expertise around the ability to predict and manage high-cost medical conditions to set appropriate pricing and limit the losses,” said Pliss.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=335212.

A video discussion of this report also is available at http://www.ambest.com/v.asp?v=ambglobalrehealth923&AltSrc=182.

For future global reinsurance reports ahead of Rendez-Vous de Septembre, please visit Best’s Research.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 10, 2023, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit https://www.ambest.com/conference/rvds2023/index.html.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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