MONTE CARLO, Monaco — While property catastrophe reinsurance business, particularly in the United States, currently is the area where the majority of third-party capital coming into the reinsurance industry is being deployed, as capacity increases investors likely will look for new ways to deploy that capital, experts say.
As capacity increases and rates for property catastrophe business likely fall, third-party capital investors may look to other geographical territories and lines of business for returns, according to experts gathered at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo, Monaco.
There likely will be third-party investors that seek to deploy their capital into other lines of business, but when and how are currently unknown, said Chris Waterman, managing director at Fitch Ratings Ltd. in London.
Investors may seek to partner with reinsurers to enter different lines of business, such as casualty, he noted.
Experts are considering how to expand the use of third-party capital beyond property catastrophe perils, noted Linda Haddleton, managing director of Kane (Cayman) Ltd. There may be new solutions developed to package liability risks in a way that is more suited to third-party capital investors, she noted.
“It is plausible” that some third-party capital providers will look to underwrite casualty lines, said Stuart Shipperlee, analytical partner at London-based Litmus Analysis. “But it is not such a natural fit as property catastrophe,” he noted.
Currently, a great deal of research and development is taking place to find products in business lines other than property catastrophe that could be attractive to third-party capital investors, said Tony Ursano, CEO of Willis Capital Markets & Advisory in New York.
It is inevitable that capital markets investors likely will seek to extend their participation in the market beyond U.S. property catastrophe business, noted Paul Schultz, CEO of Aon Benfield Securities. “But how that happens is yet to be determined,” he said.
While there may not be, for example, a rush of casualty bonds there may be some such instruments developed, he said.
The lines of business that will interest third party capital investors will be those where there is plenty of data, he noted.
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