Alternative capital continues to transform reinsurance sector: Guy Carpenter
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The ongoing influx of alternative capital is continuing to have a profound effect on the traditional reinsurance sector, according to a report issued Tuesday by reinsurance brokerage Guy Carpenter & Co. L.L.C.
Over the past 24 months, roughly $20 billion has entered the reinsurance market through a combination of insurance-linked securities, specialist funds, sidecars and the creation of hedge-fund related reinsurance companies and collateralized reinsurance vehicles, leading to significant change, Guy Carpenter said in “Reinsurance: The Capital Markets Evolution Continues.”
“The influx of new capital into the reinsurance industry constitutes the largest change to the sector's capital structure in recent memory,” according to Guy Carpenter.
Capacity and choices are expanding, the report says. “The amount of limit placed utilizing ILS and collateralized products continues to grow, and some markets are broadening the line of business and product focus.”
While still evolving, these alternative capital vehicles have become entrenched in the reinsurance sector.
“Although the future direction of capital flows and (re)insurance pricing in the years ahead is impossible to predict, the new formats and structures for risk transfer created by the ILS and collateralized reinsurance markets have become well-established elements of the risk transfer landscape,” Guy Carpenter said in the report.
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