Impact of reinsurance on liability insurance in Latvia

Abstract

Liability insurance demands careful underwriting due to its specific exposure. Meanwhile, the total Latvian liability insurance market is relatively small. Consequently substantial reinsurance assistance is required to underwrite and handle risks. Inadequate and constant reinsurance programme can reduce the liability insurer‘s portfolio profitability and competitiveness. This paper aims to determine factors having the largest impact on reinsurer choice among the Latvian liability insurers and suggest optimal reinsurance scenarios under different market conditions. In order to achieve this, the analysis of theoretical literature, statistical data and scenarios is performed, as well as results of the survey conducted among local and foreign liability (re)insurance professionals are summarised. It is concluded that reinsurance has a direct impact on liability insurance in Latvia, reinsurance treaties have to be reviewed on a regular basis and reinsurance programme has to enhance profitability and competitiveness of primary insurer‘s liability insurance portfolio.