‘Enormous potential’ for the capital markets in reinsurance: SIFMA exec

by Artemis on March 4, 2015

At the SIFMA Insurance and Risk Linked Securities (IRLS) 2015 conference held in New York today, executive vice president of business policies and practices at SIFMA, Randy Snook, said that there is “enormous potential” for the capital markets to grow in reinsurance and ILS.

Snook said that there is “much to be positive about” and that the roughly 20-year-old ILS market, where the capital markets have increasingly become a mainstay of global reinsurance capacity, has room for growth.

“There is enormous potential for capital markets to bring additional capital and solutions to cover a more diverse set of risks and perils,” Snook explained.

In recent years the ILS market has grown at a rate of roughly 20% per annum, taking the catastrophe bond market to record highs and the amount of capital markets backed protection in use across the reinsurance space to nearer $65 billion.

Snook explained that despite the “debate and skepticism on the durability of the capital flows into this market” the ILS market has in recent years displayed “very encouraging and solid growth.”

The enormous potential that Snook described was reflected by speakers throughout the morning at the event, with suggestions that continued convergence of capital market and traditional reinsurance capacity is likely, that ILS will increasingly seek to penetrate the primary insurance market and that this is positive for cedents or sponsors from both insurance and reinsurance markets, as well as for the investors alike.

In the currently softened reinsurance market the impact of ILS and the capital markets is strongly felt. However speakers explained that the way the market has changed in the last few years may be nothing on the change that we see over the next ten.

With risk capital more mobile, more efficient and more willing to take on insurance risks than ever before, the future looks bright for ILS and for continued market growth.

The SIFMA event itself has grown significantly over the years, with around 500 attendees registered for the 2015 event. Expect more from Artemis on the discussions at the 2015 event over the coming days.

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