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Critical condition as Swiss Re ends cover

A move by Swiss Re to stop underwriting critical-illness policy guarantees could devastate the market for guaranteed CI products.

Advisers are concerned that other reinsurers, notably GE Frankona, could follow, finishing off the CI market for products with terms of over five years without premium reviews.

Swiss Re is to stop offering guarantees of more than five years on CI contracts because the speed of medical advances and changing definitions are dramatically changing its risk exposure. Deputy chief executive Stephen McArthur says the move may lose it market share, depending on what competitors do.

IFAs are concerned GE Frankona may not want to shoulder all the risks of guaranteed business. GE Frankona head of pricing Azim Dinani says the future for such practices is difficult to predict.

Around 98 per cent of CI business has a guarantee attached. Swiss Re says its move will only affect new business.

McArthur says: “We do not think it is prudent to offer long-term guarantees of that nature. There is a chance, depending on what happens in the balance of the market, that we could lose market share.”

Rickman Tooze financial adviser John Haynsworth says: “I do not think total demand for CI will dry up without a guaranteed rate but there will be a significant minority of clients who will not like the idea of reviewable premium rates.”

Winful Associates principal John Winful says: “I think it is a very disturbing development when reinsurers start to pull out of the market in this way. I think others will follow and the market will suffer.”

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