It's all change on the life reinsurance front. Since Global Reinsurance produced last year's life report, further consolidation, new entrants and dramatic downgrades have changed the face of this traditionally steady industry.

Life is also getting riskier - literally. According to AM Best's 2006 Annual Global Reinsurance Study, life reinsurers in some jurisdictions, notably Europe, are taking on more risk or increasing their use of alternative risk transfer options (such as securitisation) in response to a decline in demand and growth in competition. Unlike Europe, growth continues unabated in the US, fuelled by a shrinking market and reduced competition. But capital market ventures are also on the up in the US - with the collateralisation of Regulation Triple X reserves dominating this area.

Overall the picture looks good. According to Standard & Poor's, in 2005 total gross written premiums for the world's ten largest life reinsurers amounted to just under $35bn, up from $25bn in 2004. Globally, the largest and most well-established players may still rule the roost, but moving forward, new entrants and key mergers are likely to threaten their stronghold. Recent acquisitions include Gerling by HDI, GE Insurance Solutions by Swiss Re and Revios by SCOR. While Wilton Re was the only new entrant in 2005, two new life reinsurers are bringing capacity to the US market in 2006. Enter ACE Life and XL Re Life. But this is limited new supply and unlikely to have much influence on hardening premium rates there.

Perhaps the biggest headline of the year so far is Scottish Re's rapid decline. The shock departure of CEO Scott Willkomm on 31 July was the first sign of trouble. Then the reinsurer announced it expected to report a $130m net operating loss for the second quarter, information the rating agencies greeted with several prompt downgrades. At the time of writing, Scottish Re had a "B+" financial strength rating from both AM Best and S&P.

Looking ahead, the challenges are many. Regulatory pressures - Solvency II in Europe and Regulation Triple X in the US - will potentially lead to further tapping of the capital markets, mainly in the form of insurance-linked securities. Pressure to speed up service, reduce costs and improve operating results will also require wider use of technology. Then there are emerging risks such as nanotechnology and pandemic influenza, which have yet to show their true colours. In all, it's both a dynamic and testing time to be a life reinsurer.

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