Chris O'Kane has been group CEO of Aspen Insurance Holdings Ltd. since founding the Hamilton, Bermuda-based company in 2002. Last year, he lead Aspen's successful effort to thwart a $3.2 billion hostile takeover bid from Endurance Specialty Holdings Ltd. He recently sat down with Business Insurance Associate Editor Matthew Lerner to discuss the company's challenges and the reinsurance sector in 2015.

Q: Do you see Aspen as either a buyer or seller in this era of industry consolidation?

A: It's very, very tough to achieve growth. The U.S economy is off its knees but hardly at a healthy growth level, and Europe is worse. Without economic activity, it's quite hard for insurance to grow, so people turn to consolidation as an alternative way to achieve growth. I don't think consolidation is necessarily the answer how to achieve profitable growth, but done well it probably can, and I think that's why we're now hearing more about consolidation. If we felt we could create more value, either by buying someone else or selling to someone else, we would consider either possibility. The test is really what creates more value for our shareholders with greater assurance and with greater speed.

Q: What is the greatest challenge facing the reinsurance sector in 2015?

A: Overcapacity, the overabundance of capital. The nature of reinsurance is dealing with infrequent and potentially serious threats for which a premium is charged. Absent those threats becoming losses, capital builds up very quickly. My guess is that in 2014, many reinsurers will have achieved better than 10% return on equity, some better than 15%, some could even be better than 20%. So, that's a lot of extra capital in the sector. It's creating its own oversupply of capital. So I think the challenge is the supply-demand equation — the supply of capital and the demand for products that capital is meeting — is out of kilter.

Q: What are the bright spots for reinsurers heading into 2015?

A: I think that despite price declines, property and catastrophe coverage is still relatively well-priced. We would say industrywide that property/catastrophe is a double-digit return on equity business. We wouldn't say, however, that industrywide casualty reinsurance is a double-digit return on equity business — we think it is less than that. One of the bright spots is that you can look at areas of exposure, although priced less than they once were, still offer the potential for a reasonable return on the equity deployed.

Q: Are the capital markets a threat to traditional reinsurance?

A: I think if traditional reinsurers were to stand still and say “We don't do that; we'll never do that,” — that would be a problem. I think what most traditional reinsurers are saying is: “Our client base wants to buy some of what we've always sold, and some of their needs they feel are better met by a capital markets product.” So, many reinsurers — certainly including Aspen — are developing ways to meet the customer's need from both sides of the market.

Q: Do you think the insurance-linked securities market will continue to evolve? Will it become a permanent part of the reinsurance landscape?

A: The ways in which the new capital markets products will evolve is to make them more user friendly, more like the traditional products, including figuring out a way to provide a reinstatement of cover. They will try to more closely meet the needs of the customer. Capital markets products tend to be quite complex and therefore tend to be bought by larger, more complex companies. One of the ways the market will evolve is to try to simplify the product and make it more amenable for smaller and less sophisticated companies. I think there are efforts going on to achieve that.