The New York Insurance Exchange is back on the agenda. Originally opened in 1980 to much fanfare only to dissolve 7 years later as a victim of a soft market and inadequate capitalization (among other things). New York Insurance Superintendent Eric Dinello thinks that now is the time to attempt to reopen the exchange citing progress in technology, better transparency and the interest of the capital markets as key reasons that it could now succeed.
Interest from hedge funds in the capital market traded risks could make the exchange a viable proposition. If it returns as a specialist center for high-end, capital market traded risks it could make entry into the capital markets much easier for reinsurers. It would be interesting if the exchange could allow the creation of syndicate SPV’s to allow reinsurers to domicile their SPV on home soil and thus take away the requirement to domicile in the islands such as Bermuda and Cayman. This would also help as it keeps the capital on U.S. soil and would allow for close relationships between these companies and the New York based financial community.
To make it a reality I believe they really need to think innovatively and put both technology and the capital markets at the heart of any relaunch. A U.S. situated centre of excellence for high-end alternative risk transfer could be a very attractive proposition at a time when interest in instruments such as insurance-linked securities is growing amongst the investment houses of the world.
Read an article on this topic at Business Insurance.