Alternative reinsurance capital

International insurance and reinsurance industry ratings agency, Standard & Poor’s (S&P), has highlighted the need for reinsurers to innovative solutions and develop strategies to exploit the range of business opportunities across the sector.

Risk modelling firm AIR Worldwide has provided its initial estimate of insurance and reinsurance industry losses from hurricane Matthew, putting the figure somewhere in a range from $2.8 billion to as high as $8.8 billion across the United States and the Caribbean.

The Chief Executive Officer (CEO) of XL Catlin, London, Jonathan Gale, has stressed the requirement of insurers and reinsurers to offer insurance-linked securities (ILS) solutions in order to reduce the overall cost of reinsurance protection.

Primary insurance company loss estimates are now being announced, with the latest being Federated National Insurance (FedNat), which is set to call on its reinsurance panel, while Homeowners Choice Group (HCI) said the loss will not trigger reinsurance recoveries outside of HCI.

Risk modelling company Karen Clark & Company (KCC) has estimated that the insurance and reinsurance industry will be liable for an industry loss of around $7 billion from hurricane Matthew’s impact on the United States.

Summer flooding from extreme rainfall and storms that affected the Yangtze River basis and north-northeastern China resulted in economic losses of over $38 billion, but just 1.5% or $596 million was covered by insurance, according to reinsurance broker Aon Benfield.

In response to recent merger and acquisition (M&A) activity in the global reinsurance market and the potential for it to increase, Fitch Ratings has suggested that alternative reinsurance capital could expand and replace any lost capital.

Continued expansion of the insurance-linked securities (ILS) market into new business lines and geographies will require creativity and innovation, according to Paul Schultz, Chief Executive Officer (CEO) of Aon Securities.

Insurance industry think tank, the Geneva Association (GA), has underlined the necessity of reducing the financial impact of extreme weather events across the globe, an area where the features and capacity of the ILS market has the potential to play an important role.

Rates in the U.S. commercial P&C sector declined by an average of 1% in September, the fourth month in a row that a -1% rate movement has been recorded, suggesting the market is at a “standoff,” according to Richard Kerr, Chief Executive Officer (CEO) of MarketScout.