What is the driver for higher market rates for P&C XOL reinsurance contracts? Sources I have show 1-2% is charged by reinsurance intermediaries for QS contracts while XOL is 10% (though brokers in some markets are currently sharing some of their commission with the insurers). Reinsurance intermediaries have little overhead and consistent relationships with the same relatively limited group of reinsurers so what makes reinsurers willing to pay 10% for XOL contracts?
How do reinsurance brokers know reinsurers wouldn't be willing to spend more on commission (as is charged in UK)?
It's generally known that reinsurance brokers have little overhead and some if not most states have a maximum risk statute that requires reinsurance above it be purchased ensuring there will always be a strong market for reinsurance so what prevents competition among the largest reinsurance broker groups from engaging in a price war driving down the 10% rate to nearly nothing?
How do reinsurance brokers know reinsurers wouldn't be willing to spend more on commission (as is charged in UK)?
It's generally known that reinsurance brokers have little overhead and some if not most states have a maximum risk statute that requires reinsurance above it be purchased ensuring there will always be a strong market for reinsurance so what prevents competition among the largest reinsurance broker groups from engaging in a price war driving down the 10% rate to nearly nothing?
