Rhine Re pulls facultative business

Another reinsurer has withdrawn capacity from the Canadian market with Rhine Reinsurance’s recent decision to discontinue its facultative business. The reinsurer experienced “marginal losses” in this area since it entered this particular line three years ago, says Patrick King, chief agent of the company’s Canadian operations.

“Inadequate rates” were largely to blame, he comments. “Rates remain depressed despite our hopes that they might have improved.” The facultative risks (which generally categorize single and out-of-the-ordinary items) underwritten by Rhine Re represented about 5% of the company’s total written premiums for 1999, an amount which King says was an “immaterial portion” of the company’s business, and which under the circumstances of the market did not justify continuing. “We didn’t see enough movement in the three years we’ve been in the facultative business. It didn’t make sense to continue.”

Rhine’s Canadian facultative exposures were largely property risks, not liability risks which plagued many reinsurers in 1999. At least 10 primary companies which underwrote business through Rhine Re will be affected by the company’s decision to withdraw from the market.

King points out that the decision to retract from the facultative market was not simply related to Canada. The company plans to reduce its facultative exposure on a worldwide basis, again due to the competitively cutthroat nature of the market. However, he adds, “They [the group] will continue to write [facultative risks] in certain areas, and in certain industries, where rates appear adequate.” And, he notes, the decision to pull out of the facultative market in Canada is not a precursor of further withdrawal by the company from its other lines. “We will continue to concentrate on our [standard] treaty business.”