The recent rapid influx of capital markets money into the reinsurance sector could represent the single biggest change the industry has ever experienced. Whether it is a case of revolution or evolution, we examine the 10 red hot questions the industry is struggling to answer about the consequences of this change.
1. How would this capacity react to severe losses?
In the event of very big losses, for example thanks to a bad hurricane year in 2013 (which has been forecast), how would capital markets investors react? Would they remain committed or flee from the sector?
In an industry whose existence is based on long-term relationships and commitment through the good times and the bad, this could be key to the extent to which cedants are willing to use insurance-linked securities (ILS) and other structures such as sidecars if they fear that capacity will not be reliable in the long term.
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ILS, Intelligent Insurer, Capital Markets, Reinsurance