Quantifying the fear factor to end the soft market

01-11-2016

Quantifying the fear factor to end the soft market

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As much as reinsurers might wish for a big loss to trigger a hard market, that is unlikely given the capital waiting in the wings. In fact, only the fear generated by an unpleasant surprise would change the current market dynamic, Intelligent Insurer hears.

As the soft market persists and the pain of low rates combined with historically low investment returns continues to hurt reinsurers, the big question for some time has been: what will it take to turn the market?

The problem with this question is that, unlike in previous elongated soft markets, mechanisms now exist that allow money from the capital markets to enter the industry extremely quickly. Because so much money has already poured in during recent years, it is abundantly clear there is a lot more waiting in the wings should rates show even the smallest hint of increasing.

On this basis, many believe a big catastrophe loss would not be enough move the market. Instead, only a combination of factors or something much more sinister and fundamental would be needed to effectively scare third party capital from making that investment.


Reinsurance, P&C, Soft Market, Europe, North America, Stephen Catlin, Jed Rhoads, Charles Goldie, Brian Duperreault, Kaj Ahlmann

Intelligent Insurer