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Today at the 23rd General Assembly of the Panamerican Surety Association, Peter Schmidt XL Catlin’s Chief Executive, APAC, LatAm & Global Credit/Surety Reinsurance, will present the findings of an XL Catlin market survey. The survey, based on 36 in-depth interviews with XL Catlin’s reinsurance clients across surety markets, revealed that the executives polled were cautiously optimistic about the market’s prospects. According to the executives polled, the USD 13 billion global surety insurance market is expected to benefit from the current recovery in mature economies, while the current downturn in developing economies is not perceived to substantially challenge their long-term growth prospects. Speaking ahead of his presentation at the assembly in Cancun, Mr. Schmidt said: “Our survey aims to provide greater information on the trends and developments that currently dominate surety markets and demonstrate our reinsurance operations’ commitment to advancing this line of business, which plays a vital role in the global economy.” Key findings of the survey: • Strong reliance on public spending The surety sector continues to rely heavily on public spending and, to a lesser degree, private investments in infrastructure and construction. According to interviewees, investments remained stable over the past 12 months and the outlook is mildly positive. In mature markets existing infrastructure needs to be maintained and modernised, while in emerging markets it still has to be developed and expanded for economies to realise their full potential. • Striving to diversify To reduce their dependence on public investments, surety insurers are striving to diversify and enhance their services. In Europe in particular, but also in some Latin American markets, insurers are increasingly cooperating with the banking sector to provide back-to-back cover for risks that go beyond the banks’ capacity or their business interest. • Premium income expected to rise but rates may declineOverall, the polled executives expect premium income to rise over the next 12 months. However, as competition intensifies, rates may decline further. Similarly, the insurance terms and conditions that prevail in the surety market are perceived as average to loose and may deteriorate. By contrast, low loss ratios have been a strength of the surety sector in recent years. Currently though, claims are perceived as slightly higher than their historical average and might rise over the next twelve months. • Still profitable Despite the pressure on rates and conditions, the global surety market remains profitable. The majority of executives participating in the survey see current levels of profitability roughly in line with the average of the past five years. However, the outlook for the sector’s technical results is slightly muted. For 56% of respondents, profitability will remain unchanged over the next 12 months, while 25% expect a decline. • Responses to challenges are limited The surety industry’s strategic responses to the current challenges are limited. Innovation and alternative sources of income are rare. They occur in relation to banking-style products. Sureties are increasingly capable of capturing business historically written by banks or, alternatively, they seek to co-operate with banks, as discussed above. Consequentially, interviewees frequently state that they are strengthening underwriting discipline, focusing on technical excellence and closely managing their client relationships. In addition, sureties are increasing or refocusing their distribution network by expanding into neighbouring markets or specific client segments like SMEs, which necessitate adjustments to the design or mix of their product offerings. • Reinsurance protection is valuedThe surety insurers were asked about the key reasons for buying reinsurance protection. As we would expect, protecting their balance sheet against large loss events and access to capacity to shoulder large risks are key motivations. Since the surety sector is still dominated by national markets, cedants appreciate their reinsurers’ global expertise and ability to support them in enhancing their portfolio’s efficiency, or in introducing products successfully offered in other markets. Relationships are seen as stable and determined by factors like the above, in addition to capacity and the quality of the security. For many of the interviewees though pricing is seen as less of a decisive purchasing factor. About the Surety Survey The surety survey is based on in-depth and structured telephone interviews with executives representing 36 regional and international insurance companies active in surety business. The interviews were conducted in December 2015 and January 2016 by Dr Schanz, Alms & Company AG, a Zurich-based research, strategy and communications consultancy, on behalf of XL Catlin’s reinsurance operations. About the XL Catlin Reinsurance Operations The XL Catlin reinsurance companies are among the world’s leading reinsurers. They offer products that include aerospace, property, casualty, marine and specialty. The world’s top insurers choose XL Catlin to help move their businesses forward. To learn more, visit About XL Catlin XL Catlin is the global brand used by XL Group plc’s (NYSE:XL) insurance and reinsurance companies which provide property, casualty, professional and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world. Clients look to XL Catlin for answers to their most complex risks and to help move their world forward. To learn more, visit