Six months ago, many in the global insurance and reinsurance market expected a drastic decline in the availability and usage of capital markets as an alternative source of support for traditional reinsurance programs.

But major reinsurance buyers polled by Business Insurance are confident that the capital markets will deliver if needed, and brokers attending the Rendez-Vous de Septembre reinsurance gathering in Monte Carlo, Monaco, spoke of the resilience of the catastrophe bond and industry-loss warranty markets, among other tools.

One of the U.S. reinsurance buyers surveyed by BI explained his group has, since 2004, constructed a risk transfer program that combines strong reinsurance with complementary benefits from multiyear, fully collateralized securities.

He said the focus is to obtain coverage for those risks that are not traditionally placed in the reinsurance market or for coverage from events with a term period that would simultaneously stress the balance sheets of the reinsurance companies, putting a premium on liquidity and collateral.

One vehicle is for one, large catastrophe and another for aggregate reinsurance and multiple events, he explained. “So we have accessed both the capital markets and the traditional reinsurance markets in a complementary fashion over the last several years,” the buyer said.

“The securities market has been a cornerstone of our strategy since 2004. And when we entered the market in 2004, we were clear in saying that it was a strategic long-term investment, and that hasn't changed,” he said.

Another U.S. reinsurance buyer said his company does not use the capital markets, but added, “We plan to carefully review capital markets for use in the future. We would give serious consideration to the issuance of wind cat bonds.”

And a third U.S. reinsurance buyer said his company uses the capital markets and would rely on them more “if the opportunity presented itself and it made business sense to do so.”

A Japanese buyer also said his group does not use capital markets as an alternative to reinsurance, but also left his options open. “Utilization of the capital markets is always considered if strong benefit can be found,” he said.

One of the European buyers also said his company does not use the capital markets as part of its reinsurance strategy, but is open to the concept. “We are talking about it, listening to others and reading a lot. But not at this time. It could happen. Why not? Let's see what happens. If the crisis is slowly but steadily improving, I really wonder if we will need the capital markets in the future,” he said. 

Another of the European reinsurance buyers also voiced confidence about the ability of the capital markets to bounce back and deliver for buyers. “We have done some capital-market transactions in the past and look to do more in the future. We are looking at the cat bond market. We do think it will come back,” he said.