The best capital stewards use a strategy that takes account of all the available options, say Des Potter and Chris Ezbiansky.
With an abundant supply of capital in the reinsurance sector, negligible organic growth opportunities and a softening pricing outlook, reinsurers are confronted with the difficulty of having to decide how to deploy this capital to generate returns that satisfy shareholder expectations while ensuring their business model remains competitive.
A thorough understanding of the drivers of the new capital flowing into the reinsurance market, which is now attracting the attention of regulators, and the structural impact this may have, is essential for developing an optimum capital management strategy.
The balance of options under consideration include maintaining the status quo, returning capital to shareholders and investing in a growth and/or diversification strategy, either organically or by seeking merger and acquisition (M&A) opportunities.
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Intelligent Insurer, Des Potter, Chris Ezbiansky, GC Securities, Reinsurance