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Original Risk: A Society for Change Agents

Find ways to use alternative reinsurance capital to cover new risks: XL’s CEO McGavick


Insurance and reinsurance companies need to find ways to use the influx of alternative capital, from third-party investments in reinsurance and insurance linked assets, to cover new and emerging categories of risk, according to CEO of XL Group Michael McGavick.

McGavick, speaking to 200 insurance professionals at the 2014 Brokerslink Global Conference recently, said that alternative reinsurance capital is nothing to fear, rather that it is something to take advantage of and to use to insurers and reinsurers benefit.

This is a message that is increasingly being used by large insurers or reinsurers, who are finding ways to leverage third-party and alternative capital as a way to enable growth, expansion into new regions or expansion into new and emerging business lines. There remain some who would rather question the permanence of alternative capital, but increasingly the forward-thinking are suggesting it is a route to growth in a difficult market.

“I view this capital coming into our industry as an opportunity, not a threat,” said McGavick. “Supported by analytics and our deep understanding of risk, we must be adaptive in finding ways to use this capital to cover the long list of new and increasingly technology related risks to respond to the unmet needs of a global economy.”

McGavick’s message is similar to CEO of Lloyd’s of London Inga Beale’s, who said that the insurance and reinsurance market should embrace alternative capital as an opportunity for growth.

XL Group has its own third-party reinsurance capital and ILS venture New Ocean Capital Management, so it is no surprise that finding new ways to make use of alternative capital is a topic of discussion right up to the CEO level.

Other re/insurers that have not embraced alternative capital and that prefer to question the business model, investors commitment and the staying power of ILS, would do well to listen to the more progressive executives who see it as a positive opportunity for their businesses.

Also read:

XL’s McGavick likes the look of a capital agnostic reinsurance future.

New Ocean ups income to XL, hires COO, signs distribution agreement.

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