Alternative reinsurance capital to persist, despite being untested
Thursday, 08 27 2015, Category: Insurance and Reinsurance, Country: World
The growing pool of alternative reinsurance capacity continues to enter the global reinsurance market, becoming an increasingly integral part of the sector’s landscape, but will third-party investors and their capital remain after the next large loss event?
“We believe the majority of it (alternative reinsurance capacity) is here to stay. Like every market there are sources of capital that come in for the momentary opportunity and then exit when a different opportunity emerges.
“But we believe a lot of the money coming in here is permanent money because that uncorrelated risk is real and it has been demonstrated to be a positive feature in their overall portfolio management,” advised Guy Carpenter Vice Chairman, David Priebe.
Generally, Priebe’s view on the longevity of alternative capital appears to be one adopted by the majority of reinsurance experts, executives and analysts in recent times. But the reality is that since the influx of alternative capital really started to gain mass, on top of the existing and expanding traditional sources of capacity, the industry hasn’t had to deal with a significant loss event.
Underlined by the fact that Florida hasn’t experienced a major hurricane for nine years now, the longest period sine 1851.
Reinsurer Aon Benfield’s Americas subsidiary, Chief Executive Officer (CEO) and Chairman of Aon Securities Inc., Byron Erhart shares Priebe’s view on alternative capital, suggesting that its evolution has changed reinsurers’ outlook on its permanence.