By Patience SAGHANA
Life reinsurance  market has evolved dramatically in the past decade. While almost 10 companies used to write 85% of the business, today the top five players write 85% of the business.
In addition to consolidation, life reinsurers have seen their piece of the pie shrink. Cession rates were at their lowest point of the decade in 2009, at 33.9%, down from 61.8% in 2000, according to an annual life reinsurance survey conducted by Munich Re on behalf of the Society of Actuaries.

Also, retrocession rates tumbled 49% in 2009. “It’s a result of reinsurers retaining more of their business. Volume amounts have dropped,” Dave Bruggeman, assistant vice president at Munich Re, said.

Bruggeman, the author of Munich Re’s annual survey, said the drop in retrocession is a symptom of fewer players in the market. “It’s such a concentrated market, if one or two reinsurers raise retention, it really impacts the retrocession market,” he said.

Recurring life reinsurance  reinsurance written the same year as the primary policies dropped 9.4%, the seventh consecutive annual drop, according to Munich Re.

But, the life reinsurance marketplace remains stable, experts said.At the beginning of the decade, primary writers were just beginning to come to terms with the new reserving requirements of XXX and AXXX.

Many primary writers sought out reinsurers to help carry the increased reserve requirements, or turned to bank solutions, such as letters of credit, or even securitizations.

The structured financial market has stalled since the financial market meltdown, which was caused in part by problems with mortgage-backed securities, said Chris DesRochers, senior managing director of consulting firm LECG.

“To the extent that interest rates are down, structured finance really hasn’t been available and the cost of letters of credit has gone up with upheaval in the financial markets. That’s created pressure on the term market and term pricing,” DesRochers said. “Capital is still a very big driver in the market. The cost of capital has gone up for the industry, and that’s played through on the term side.”