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Original Risk: A Society for Change Agents

Old meets new as alternative reinsurance capital grows share


Artemis currently finds itself in Monte Carlo at the annual reinsurance Rendezvous event. In its 57th year, the Rendez-vous de Septembre brings an estimated 3,500 executives from insurers, reinsurers and associated service companies to the Mediterranean resort to discuss reinsurance renewals and the industry issues of the day.

The event brings CEO’s who are responsible for thousands of employees together with their key broker contacts, partners and counterparties, for early discussions on reinsurance business that will eventually be transacted at the January renewals. Hot topic of conversation, at the bars, cocktail parties and lavish dinners, is the increasing influence of third-party capital and the impact it is having on the space.

This is a topic Artemis has covered in extensive detail. You only have to look back through the last few weeks of archives to see the thinking of much of the industry on this topic which at times divides, but is also bringing together pieces of the market which historically have remained separate.

The event itself, being 57 years old, is full of tradition, with companies holding their events at the same locations, with the same faces attending and often the same corporate messages being displayed. So it’s appropriate that the first interesting comment from the event is one about the old meeting the new.

At a press briefing held by reinsurance broker Guy Carpenter today, Vice Chairman David Priebe discussed the influx of new capital and the way it is changing the dynamics of the reinsurance market today.

Priebe discussed the alternative reinsurance capital trend at some length, including the size of the market, third-party capitals growing share of catastrophe reinsurance, its recent trajectory and how the traditional reinsurance market has begun to adapt to it. Adaptation and innovation were key themes at Guy Carpenter’s press briefing, as CEO Alex Moczarski said that reinsurers needed to learn how best to utilise different forms of capital from different sources, as it is not a trend that’s going away.

The interesting comment for this article came from David Priebe, who said that Guy Carpenter sticks with its comments from a year earlier that the reinsurance and capital market convergence had happened. As evidence of the extent of this convergence, Priebe highlighted Lloyd’s syndicate 2357 which Nephila Capital provides capacity to to gain access to Lloyd’s business for its investors.

Priebe said that Nephila’s entry into Lloyd’s epitomises convergence of the oldest with the newest, referring to the Lloyd’s reinsurance market, as the oldest reinsurance market in the world, and ILS capital from Nephila as the new.

It’s a great way to get the meaning and importance of convergence across and one worth pondering. If third-party capital can enter and disrupt the Lloyd’s market in the form of a traditionally formed Lloyd’s syndicate, is there anywhere in the reinsurance and indeed insurance market that it cannot touch?

We don’t think so. Time will tell, but the trend is pointing towards a real shift in the reinsurance business model and to cope with that shift everyone, insurers, reinsurers, brokers and even ILS asset managers, will need to prepare to adapt and innovate as the market moves forwards in its newly converged state.

Normal service will continue over the next few days, but expect a few more pieces on the goings on at Monte Carlo interspersed with it.

More reading:

There are so many reports and commentaries coming out on alternative reinsurance capital and ILS in the run up to the Monte Carlo Rendezvous event that we felt it worth highlighting some other reading on the topic, all from the last week or so, which you can find below (most recent first):

Demand for alternative reinsurance instruments and ILS to continue: Fitch

Alternative capital the biggest challenge for traditional reinsurers: Moody’s

Lloyd’s Nelson warns on ‘systemic’ risk of alternative reinsurance capital

Broker facilities an opportunity for third-party capital to expand reach?

Opportunity for reinsurers to learn from ILS: Aon Benfield CEO

Capital markets investors boost global reinsurer capital to $510 billion (including a useful list of links to many alternative reinsurance capital initiatives that we have covered previously)

Strong capital inflows bring ILS & cat bond market to new high: Aon Benfield

Alternative capital a disruptive force in reinsurance: Goldman Sachs

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