Demand for Health Reinsurance Grows Amid Changing Global Trends

The global rise in healthcare utilization and the threat of increasing medical inflation are likely to drive further demand for health reinsurance, according to a recent report by AM Best.

The report, titled Changing Trends Continue To Push Up Demand for Health Reinsurance, is part of AM Best's broader analysis of the global reinsurance industry.

The report highlights that while health reinsurance premiums continue to rise globally, the growth rate has moderated over the past 3 years. The commercial and stop-loss segments have been key drivers of this increase. "Health insurance remains one of the faster growing segments in the global insurance industry, and accounts for approximately half of the premiums generated," said Doniella Pliss, director of AM Best. "However, the role and global volume of health reinsurance are still relatively modest compared with other reinsurance segments."

The report also notes that the demand for health reinsurance is generally lower than other segments due to the typically short-term nature of obligations, pricing flexibility, and minimal exposure to catastrophes. In the United States, the expansion of health reinsurance has been fueled by lower profitability, a steady rise in high-cost claims, and primary insurers' need to optimize capital structures.

Despite significant growth in health premiums reported by global reinsurers over the past decade, the pace has slowed in recent years. The report attributes a decline in health reinsurance premiums in 2021 and 2022 to disruptions caused by COVID-19, particularly in emerging markets. Nevertheless, positive results in the health reinsurance sector have helped offset losses from COVID-19 mortality claims.

"Emerging markets, particularly in Asia, also continue to generate material growth of health reinsurance premium," Ms. Pliss said. "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."

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