Changing trends driving demand for health reinsurance: AM Best

According to global credit ratings agency AM Best, the recent global rise in healthcare utilisation, combined with the prospect of increasing medical inflation has the potential to “expand the role of health reinsurance.”

A new report from the agency states that from a global perspective, health reinsurance premium levels are continuing to rise, however that pace is said to have moderated during the last three years.

According to AM Best, this increase has recently been driven by the commercial and stop-loss segments.

Doniella Pliss, director, AM Best, commented: “Health insurance remains one of the faster growing segments in the global insurance industry, and accounts for approximately half of the premiums generated. However, the role and global volume of health reinsurance are still relatively modest compared with other reinsurance segments.”

From what we understand, the need for health reinsurance usually tends to be less than for other segments, which are owed to obligations that are typically short-term, pricing flexibility and minimal catastrophe exposure.

It’s worth highlighting that in the US, the use of health reinsurance has grown due to profitability, as well as a continued increase in high-cost claims.

Elsewhere, AM Best’s report showcases that global reinsurers have reported significant health premium growth throughout the last decade,

However, if we look back at 2021 and 2022, health reinsurance premiums saw a notable decline, which is somewhat owed towards disruptions caused by the COVID-19 pandemic, in primary health product sales, especially within certain emerging markets.

Nonetheless, AM Best noted that positive results have helped offset the losses from COVID-19 mortality claims over the past two years.

“Emerging markets, particularly in Asia, also continue to generate material growth of health reinsurance premium. However, the demand for basic health products has moderated due to market saturation, while more sophisticated comprehensive products are still too expensive for mass consumption,” Pliss added.

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