The U.S. Department of the Treasury’s Federal Insurance Office released a report outlining the role the global reinsurance industry plays in the U.S. insurance industry late last year.

The report, Breadth and Scope of the Global Reinsurance Market and the Critical Role Such Market Plays in Supporting Insurance in the United States, is required under the Dodd-Frank Act.

Published on Dec. 31, the report summarizes the history of reinsurance as a product and an industry, and outlines the various functions of reinsurance.

According to a statement announcing the report, a key conclusion is that “global reinsurers are vital to U.S. insurers and thus important for the general economic prosperity” of the United States, including through enhanced availability and affordability of insurance.

Among the many benefits global reinsurers bring to the insurance sector, the report discusses:

1. Stabilizing Underwriting Results
2. Increasing Underwriting Capacity
3. Supporting Entry Into and Exit from Insurance Markets
4. Promoting Capital Allocation Among Affiliates
5. Achieving Risk Concentration or Diversification

The extent to which U.S. property /casualty insurers rely on reinsurance as of year-end 2013 was approximately 19 percent across all lines, according to the report. For property lines of insurance business, the average utilization is 18 percent for unaffiliated reinsurers, and is as high as 40 percent for allied lines.

The report indicates that the importance of global reinsurers may be most apparent following natural disasters and other catastrophes.

The report notes that Hurricanes Katrina, Rita and Wilma in 2005 resulted in about $90 billion of U.S. insured property losses, of which non-U.S. reinsurers paid approximately $59 billion. Likewise, reinsurers indemnified insurers for about 60 percent of the insured losses from the September 11th terrorist attacks, which at the time was the largest insured loss in U.S. history. More recently, reinsurers reimbursed 40 percent of Superstorm Sandy losses to insurers in 2012.

FIO, which was established within Treasury as part of the Dodd-Frank Act, monitors the insurance sector, including identifying issues that could contribute to systemic risk in the insurance industry or the U.S. financial system.

The report is available here.