It's difficult to comment without seeing the whole paragraph.
I guess what it means to say is the reinsurer can offer reinsurance cheaper than a direct writer can offer insurance on the product because they have a lower capital requirement. Cheaper reinsurance, or cheap reinsurance, will encourage a direct writer to either buy more reinsurance than it normally would or offer a product that it might not have done if reinsurance wasn't as cheap.
You're right that a reinsurer doesn't write new business in the same sense as a direct writer. A reinsurer writes business through the reinsurance treaty the direct writer enters into.
Last edited by a moderator: Jun 24, 2011