Opportunity Cost – Opportunities Lost

Even in the UK, the most sophisticated run-off market in the world, there is still the assumption that run-off is essentially a one-off phenomenon, rather than a perennial consequence of the cyclical nature of the insurance market. Philip Grant^* draws attention to an ill-lit and disregarded corner of insurance groups’ balance sheets where significant amounts of capital are being tied up

It is undoubtedly the case that in the post-9/11, post-Katrina/Rita/Wilma, world, balance sheet strength has become a key consideration for all stakeholders in the global insurance and reinsurance industry. One has only to look at the traumatic effect of a ratings downgrade, especially when it is from an ‘A’ level to a ‘B’ level rating, to understand that perceived financial resilience is crucial to an insurer’s ability to trade forward.