Continued consolidation among U.S. life reinsurers, combined with a drop in new recurring reinsurance are just two issues in an array of challenges facing U.S. reinsurers, who are responding by reevaluating their value propositions, according to a new study by Conning Research and Consulting, Inc.

"U.S. life reinsurers have seen major changes in their marketplace following on the hard market in the early years of this decade that was driven, at least in part, by the overly conservative reserve requirements of Regulation XXX," said George McKeon, analyst at Conning Research & Consulting, Inc. "In just the past few years we have seen significant continued consolidation of reinsurers, with the market share of the top five issuers jumping from 52% in 1995 to 77% in 2005. At the same time, reinsurers are dealing with a drop off in recurring reinsurance due to higher risk retention among primary insurers and competition from capital markets solutions such as securitization. Because of these and other challenges to their traditional role, we find reinsurers keenly focused on broadening their product and service offerings."

The Conning Research study, "Emerging Trends in U.S. Life Reinsurance: Challenge or Opportunity?" identifies the many challenges currently facing life reinsurers, and analyzes how reinsurers are currently responding and the long term opportunity in their market.

"As the capital positions of primary insurers have improved, and with increasing availability of capital from non-traditional sources, life reinsurers have had to reevaluate their business proposition," said Stephan Christiansen, director of research at Conning Research & Consulting.

"We find life reinsurers looking to new products and international markets to make up some of the ground being lost in the traditional U.S. market, and at the same time evaluating new risks to underwrite, such as longevity and product guarantees. But perhaps just as important, reinsurers are expanding their position themselves as capital service providers, and in some cases even moving into the role of investment banker."