Insurers turn to reinsurers for lapse risk cover

Firms are starting to look to reinsurers for explicit lapse risk cover. But assessing the risks is proving difficult due to complex influences on behaviour and a lack of historical data

Lapse risk is notoriously hard to predict because so many variables influence how policyholders behave, and also because they often behave irrationally. But Solvency II is forcing insurers to pay attention to the danger of policyholders surrendering their policies en masse. And the consequence has been an increasing interest in farming out the risk to the reinsurance market.

"We have seen an increased focus from clients wanting to come and chat about lapse risks specifically," says Nardeep