“Special reserves, treated as a capital buffer to support large losses, have also been reduced materially by reserve releases that offset pandemic insurance claims,” Lee said. “The diminished special reserve buffer resulted in an increase in catastrophe reinsurance purchase at the upper layers in past renewals.
“However, some insurers increased the retention level of their catastrophe reinsurance programs, due to rising reinsurance costs in hard market conditions, which may translate to higher volatility in their net profit.”
