Third-party reinsurance capital news

As the global reinsurance market transitions from one dominated by companies backed by equity shareholders to a new capital mix, with alternative capital sourced from third-parties a growing component of global reinsurance capacity, diligence in the selection of risks and pricing will be key.

Third-party and alternative capital’s interest in the reinsurance market, which has helped to put pressure on reinsurance prices resulting in favourable buying conditions, is set to benefit mutual insurers at the upcoming January renewals, according to reinsurance broker Willis Re.

A few days after it was reported that the UK’s leading City regulator is monitoring the influx of alternative capital into the reinsurance market, the top Canadian financial regulator has stated the importance of ensuring that third-party investors are not purely accessing reinsurance in a search for yield.

Right now, the challenges posed by alternative reinsurance capital, which has entered the market from external third-party investors, are much greater for reinsurers than for primary insurers, said ratings agency Standard & Poor’s in a report on global multiline insurers.

A new acting head of retrocessional property reinsurance has been hired at Markel Global Reinsurance replacing recently departed Martin Vezina. Greg Richardson, a prior employee of Alterra Capital before Markel acquired the firm, will underwrite retro property reinsurance for Markel and the New Point sidecar.

Partnering with alternative capital, by establishing asset management units, is not enough alone to protect property catastrophe focused reinsurance firms from the competitive effects of third-party reinsurance capital, insurance-linked securities and the capital markets.

One of the issues traditional reinsurance firms are currently wrestling with, in this well-capitalised reinsurance marketplace, is what to do with excess capital when they cannot find enough attractive opportunities to deploy underwriting capacity at a reasonable rate of return.

One of the points of discussion at the recent Monte Carlo reinsurance Rendezvous event was just how much capital might we see flow into the insurance and reinsurance market as insurance-linked securities and other fully collateralized instruments or vehicles from alternative and third-party investor sources.

According to a report in the Times newspaper this morning, the UK’s Prudential Regulatory Authority, a City regulator tasked with regulation and supervision of financial services including insurance, is monitoring the influx of alternative capital into the reinsurance market.

Last week we wrote that commercial property policy owners in Louisiana were to begin to feel the benefits of cheaper property catastrophe reinsurance as Louisiana Citizens promised to pass on some of its reinsurance savings. Now a major Florida homeowners insurer is planning to do the same.