Use excess capital innovatively, try microinsurance, Guy Carpenter tells reinsurers

by Artemis on September 12, 2010

It’s the Rendez-Vous de Septembre reinsurance industry meetings in Monaco at the moment. The event sees many of the leading lights of the reinsurance world attend to meet, discuss and learn about the state of the market. The event always has some briefings with interesting topics and yesterday there was a press briefing hosted by Guy Carpenter which looked at key industry issues, one of which was what reinsurers can do with their excess capital.

You’d think excess capital would be something that every reinsurance company would be delighted to have but actually, mainly for accounting reasons, they are always trying to find ways to put it back to work for them. In the past reinsurers have tried to pass capital back to their shareholders to gain some capital relief. Guy Carpenter yesterday urged reinsurers to put that excess capital to work by exploring innovative ways to gain competitive advantage.

Sound advice, excess capital should be invested in something which is ultimately going to bring you more business, save you money, make you more efficient or improve your processes. Guy Carpenter highlight the innovative area of microinsurance as a good place to invest excess capital (reports Business Insurance).

This is good advice, microinsurance is growing rapidly and there are pilot schemes, particularly in weather index-linked microinsurance, appearing all over the developing world. It would seem prudent to get involved sooner rather than later so that reinsurers don’t miss out.

Alternative risk techniques have an important role to play in microinsurance and finding ways to apply the techniques used to hedge insurers natural catastrophe risks to the population of developing countries seems like a valuable place to invest capital. Not only is that helping developing countries recover from disaster more quickly but it’s also providing a new and potentially huge line of business and source of capital.

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