Reinsurance in America: Regulatory Regimes and Markets

Despite its large size and long history of insurance and insurable catastrophes and disasters, the United States of America has always lagged in the development of reinsurance companies, an industry still dominated by European and offshore domiciled reinsurers. The US experience shows that reinsurance is a necessary component of the insurance industry but the cost of reinsuring through domestically-domiciled reinsurers can be raised to prohibitive levels by inappropriate taxes and regulations, like the failure to treat reinsurers as a distinct national class in a fragmented, monoline regulatory system. High regulatory costs lead to the development of alternatives, including reinsuring overseas, through reciprocal agreements among direct writers, or via other substitutes, including market-based alternatives (ARTM) like catastrophe and death bonds and other insurance-linked securities (ILS).