Alternative capital an important part of reinsurance capital structure: Baertschi, Swiss Re

Alternative capital has become an important part of the reinsurance industry’s capital structure, according to Urs Baertschi, CEO of P&C Reinsurance at Swiss Re.

In a recent Artemis Live video interview, Baertschi highlighted the important role of alternative capital and insurance-linked securities (ILS), saying also that there is the potential for it to play a bigger role outside of nat cat risks in time.

Asked about the role of alternative capital and ILS, Baertschi said, “this is a very important part of the capital structure in the reinsurance industry.”

He said the capital markets continue to be most active and effective in supporting natural catastrophe risks in the reinsurance market.

But noted that, “There could, over time, be other areas where it’s also very effective.”

Qualifying this by adding that, “In most other traditional areas, reinsurance is still the more applicable way in which risk transfer happens for our clients.”

“But it’s an important part of the capital structure, and one of the tools that clients have to mitigate their risks.”

Baertschi went on to discuss the capitalisation of the reinsurance industry in this interview.

“In total, the capital in the industry is reasonably sufficient for the vast majority of the risks that we’re talking about transferring today. Not all of them, but the vast majority.

“I think that’s a little bit behind why there haven’t been more inflows of traditional reinsurance capital, particularly new startups into the reinsurance industry,” he explained.

Continuing to say, “There’s been some capital raises, some cat bonds, but that’s been in the normal course of business, as capital remains efficient, generally speaking, in the industry.”

While on Swiss Re’s side, “We support our clients with our capital markets activities in the ILS space, as well as we offer to our investors several vehicles in which they can participate in particular risk pools that we make available through the capital markets.”

The full video interview with Swiss Re’s Urs Baertschi is embedded below and can also be viewed, along with previous Artemis Live video interviews, on our dedicated video page.

You can also listen in audio to all of our interviews by subscribing to the Artemis Live podcast here.

All of our Artemis Live video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed here.