Alternative reinsurance capital

As an industry, the property & casualty (P&C) insurance and reinsurance sector’s relevance to society has declined in recent years, but by utilising the growing capacity of the capital markets this can change, according to XL Catlin CEO, Mike McGavick.

The level of overcapacity in the global reinsurance sector is a significant driver of the softening market, and RBC Capital Markets estimates that by the end of 2014 reinsurance was home to roughly $135 billion of surplus capacity.

The latest Insurance Market Barometer from MarketScout and accompanying commentary from analysts at Keefe, Bruyette & Woods reveals U.S. commercial property and casualty insurance (P&C) rates remained flat in May.

As the 2015 Atlantic hurricane and tropical storm season gets underway, analysts at RBC Capital Markets claim that a continuation of benign catastrophe losses would be the best-case scenario for European reinsurance market players.

Here are the ten most popular news articles, week ending 7th June 2015, covering catastrophe bonds, ILS, reinsurance capital and related risk transfer topics. To ensure you never miss a thing subscribe to the weekly Artemis email newsletter updates.

Overcapacity in the global reinsurance space is set to continue, with traditional and alternative or ILS capital likely to expand as insurance and reinsurance are increasingly institutionalised as an investible asset class, according to a recent report from JP Morgan.

At the 1st June 2015 reinsurance renewals, when key U.S. and Florida property catastrophe accounts renewed, the market saw the rate of price declines moderating to average in the high single digits, according to reinsurance broker Guy Carpenter.

As headwinds continue to pressure and challenge the global insurance and reinsurance sector, JP Morgan highlights the benefits a Lloyd’s participant receives through the market’s access to niche business lines and proven capital efficiency.

For the traditional reinsurance market the competition from alternative sources of capital, such as third-party institutional investors and insurance-linked securities (ILS) funds, is a “key risk”, according to EIOPA.

PartnerRe and AXIS Capital said today that they expect third-party reinsurance capital management at the combined reinsurance firm, if the merger succeeds, will bring in annual fee income of $60m by 2017, while also providing capital relief.