There is no need for traditional reinsurance players to be to nervous when they witness alternative capital continuing to flow into the market, as the strong reinsurance underwriters will get their share of new capital, according to AXIS Capital CEO Albert Benchimol.
Benchimol is quoted in this A.M. Best article from comments he made on a panel at the recent International Insurance Society annual conference held in London. Benchimol is often outspoken on alternative capital and insurance-linked securities (ILS), although rather than treating it as competition he has long suggested his firm is ambivalent to capital source and that it will put non-traditional capital to work alongside its traditional balance sheet funds.
At the IIS event Benchimol said that even as more alternative capital looks set to flow into the reinsurance market when opportunities allow, the most efficient underwriting organisations should be able to get their share of it.
“There are ways for strong underwriters to access alternative capital,” Benchimol is quoted as saying. Underwriters need to aim to connect this new capital with risk and those who can do that efficiently are likely to get the largest shares.
“Reinsurers are the frontier where risk is happening. Maybe you can’t commoditize and securitize liability risk easily, but that doesn’t mean that you cannot get partnerships between very strong underwriters and providers of alternative capital,” he commented.
Benchimol also suggested that as well as needing to be efficient and strong underwriters in the current market environment, those who want to succeed will also need to be creative. Those companies which are more creative in the soft market environment are most likely to move up the underwriter rankings, he said.
That creativity includes being creative with capital, meaning that leveraging the right capital for the right risks, matching risk appetites with liabilities and knowing when to use the balance sheet, over third-party capital, are all going to be key traits of the most successful reinsurance underwriters in the months ahead.