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Stock Pick by Michael Van paesschen

RGA: Solvency II will increase demand for Reinsurance

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Posted 1833 days ago on 7/17/12

RGA will go UP
$150.00 on 7/17/12
$134.17 (137.22% from time of market call)

Although Solvency II is an European directive, the benefits of direct insurers buying more reinsurance will effect Reinsurers worldwide (diversification). Under Solvency II buying reinsurance becomes more attractive to direct insurers. It reduces risk, frees up capital, increases the diversification benefits, and overall reduces the SCR. RGA is a big player in the European markets, has good ratings and focuses on Life and Health reinsurance. Considering the advancement of health care worldwide, the demand for reinsuring longevity risk will increase dramatically (a cure for cancer -as wonderful as it would be- would lead most of the direct insurers to immediate bankruptcy if not reinsured well), while a increase in demand of Catastrophe/Terrorism Risk and Morbidity Risk is also to be expected. So a big increase in the demand for reinsurance and the specific operations that RGA is active in, means this stock will go up a lot within a few years.

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