Improving U.S. primary insurance rates, on the other hand, have been flowing through to proportional reinsurance treaties (or contracts). However, limited cedant demand most likely precludes drastic growth in the proportional reinsurance market. Given these conditions, factors such as competitive position, capital strength, enterprise risk management, management's ability to negotiate underwriting cycles, and diversification are likely to become more crucial for XOL reinsurers.
"Under current conditions, the ability to adapt may be more critical for reinsurers with substantial XOL writings than for those with significant primary insurance and proportional reinsurance," said Standard & Poor's credit analyst Jason Porter.