Reinsurance Explained: A Pillar of Strength for General Insurers
Every time you pay your home or business insurance premium, a portion of that cost funds the purchase of reinsurance – a global system that keeps Australia’s insurance market stable and affordable. This paper explains why reinsurance matters to every Australian consumer and how recent global changes are reshaping the landscape.
Key Findings
Reinsurance saves Australia’s insurance industry AUD 23–70 billion in required capital. Without global reinsurance, Australian insurers would need to raise material additional capital or dramatically reduce coverage. The industry currently holds AUD 34 billion in capital but would need at least AUD 57 billion to return to the minimum, or AUD 104 billion to return to current operating levels without reinsurance protection. This capital would come with a funding cost, which would be higher than margins charged by reinsurers due to the diversified nature of reinsurers compared to investors in Australian insurers.
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