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Private equity capital is positive for the insurance industry, a panel of experts suggested last week during the Harold H. Hines Jr. Memorial Symposium in Chicago.
While some observers dismiss hedge funds and other investors as "naive capital," the Hines panelists said the ebb and flow of capital is helpful to brokers and insurers--and the clients they serve.
One benefit is new capital providers generally are impatient for innovation and value creation. That means private investors are not shy about changing management, and they do so much sooner than publicly held companies do, noted Tom Golub, chief executive officer of Beecher Carlson Holdings Inc. in Atlanta. New thinking drives innovation, and consumers benefit, he said. Private capital also can enter and exit markets when conditions are favorable.
Alternate sources of capital enable insurers to meet higher capital requirements and lay off more risk, often for longer periods, than is possible through traditional channels, said Christopher Lewis, vp of alternative market solutions and property/casualty capital management at Hartford Financial Services Group Inc. in Hartford, Conn. New capital complements, but does not replace, conventional reinsurance, he said.
Investors over the last five years have become more informed, and insurance industry companies have been better managed, said John Waller, a principal at Cochran Caronia Waller in Chicago.
We agree that the industry needs innovation and growth, but smart companies shouldn't need pressure from investors to make that happen.