reinsurer not able to renew treaties
Reinsurers with poor rating's may not be able to renew their treaties - would this be due to regulatory requirements or would it be more of a wariness from the primary wanting a reinsurer who can pay their recoverables?
Comments
Your first point is interesting. There aren’t specific regulations that require reinsurers to hold a certain BCAR rating (that I know of), but regulatory bodies and industry standards often expect reinsurers to maintain strong financial health. The reasoning the source paper gives is exactly aligned with your second point.
A primary insurer can use the reinsurer's rating as one tool to assess the financial strength of the reinsurer. The source then gives an example of a reinsurer (Scor Re) who was downgraded from A to BBB, and specifically notes that most insurers that did not renew Scor Re treaties probably based their decisions on the rating downgrade.