Concentration risk
Systemic fragility that appears when a few balance sheets, exposed to the same perils and tied together by opaque commitments, carry most of the ceded risk.
Concentration risk comes from how little anyone can see of the links between players, far more than from their size. The top ten reinsurers hold 56.4% of global non-life premiums, and life has only six pure specialists. The same balance sheets carry the same major perils: catastrophe, cyber, aviation, specialty. So the diversification you think you get by spreading cessions among them is partly illusory. Taken one by one, the carriers are sound. The trouble is the group: sound balance sheets make a fragile whole once their exposures are correlated and nobody can see the links between them. It is a hard-market risk, and it thrives under cover of record profits.
Putting cyber reinsurance with a handful of carriers already loaded with catastrophe stacks two accumulation perils on the same foundations.
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