In 1984, General Electric (GE) founded the GE Employers Reinsurance Corporation, otherwise known throughout the insurance industry as ERC. The company was a branch of GE that sought to compete in the reinsurance market by entering into reinsurance contracts with other insurance companies throughout the industry.
The Rise and Fall of the Employers Reinsurance Corporation
In the reinsurance industry, the larger the insurance company, the more likely it would find success within the business. The reason for this is because larger corporations with greater financial backing can absorb greater risk than smaller insurance companies. This allows the reinsurer to accept premium payments from smaller insurance companies for assuming those risks.
The Rise of ERC
GE's ERC was very successful during the first couple of decades that it was in operation. By 2000, ERC was the fourth largest reinsurer in the world with the bulk of the business in property and casualty insurance, behind Swiss Re and Munich Re.
Although performance in 2000 wasn't quite up to par with historic earnings, few people had any reason to believe that the large reinsurer had any problems.
- In 1999, the ERC's financial strength and standing within the reinsurance industry was so strong that it acquired Phoenix Life Reinsurance's entire portfolio.
- By 2000, ERC was handling over $6 billion a year in customer claims.
- In 2000, ERC was managing over $21 billion in investments.
- ERC had $8.2 billion in premiums by 2000.
Many of their own clients and other companies throughout the insurance industry saw ERC as one of the leaders in the business. With contracts, clients, and investors across the globe, and with the support of its parent company GE, the corporation was a force to be reckoned with.
The Fall of Employers Reinsurance Corporation
Over the next few years, however, things didn't improve financially for GE ERC. The corporation's best efforts to turn around the financials failed. In 2002, the corporation forced its umbrella company, General Electric, to absorb a $1.4 billion reserve charge. By 2003, the stock ratings company A.M. Best, reduced GE ERC's financial ratings and outlook. The reduction of financial standing in the stock market is a significant blow for any insurance company, which depends upon its strong financial footing to inspire confidence in clients.
Unfortunately, the reduced rating was only one of the final signs that things were on the downhill slope for ERC. By 2004, industry experts were predicting that GE's ERC operations would be non-existent within two years. Rumors started spreading that there were potential buyers or that GE was planning to offer an initial public offering for the corporation.
The End of the ERC
The end of the Employers Reinsurance Corporation finally came in November of 2005 when the larger reinsurance company Swiss Re agreed to buy GE's reinsurance portfolio for $6.8 billion. Since part of the sale was in stocks, GE held about ten percent of Swiss Re's stock afterwards, but for the most part the ERC ceased to exist by 2005. Today, there is no trace of the previous company and very little evidence that it ever existed. Even the original website has completely disappeared, replaced by nothing but a "page does not exist" error.
Today, Swiss Re now remains one of the top reinsurance companies in the world, with clients and investors on a global scale. Most of the former ERC employees became Swiss Re employees and, for the most part, the reinsurance business continued, but with one less player in the market.