24 July 2013 News

Alternative capacity drives innovation, says buyer

One of the consequences of the influx of alternative capacity into the reinsurance market has been that traditional players have been forced to innovate more and become more creative with their solutions, according to one reinsurance buyer.

Paul Horgan, global head of group reinsurance at Zurich Group, said he believes the lower returns required by capital markets investors is becoming a key factor in driving innovation in the traditional markets.

“The new capital has really been a big changer for the market place,” Horgan said. “Alternative capacity sources are coming in with a new perspective on risk and pushing the traditional markets to be more creative.”

The change in the market is already evident according to Horgan, who notes a shift in the emphasis of corporate strategy for several of the company’s reinsurance partners.

“Some of our reinsurance partners are responding by having different pools of capital, and in some instances, almost being fund managers for reinsurance risk, as much as putting their own capital out there,” he said.

Now widely accepted as a lasting source of capital, the alternative market is viewed by Horgan, as “a great thing” representing a “long term and fundamental change”.

“I think it’s great for the industry,” he said. “The key aspect is the customer centricity; they’re really trying to bring a lot more solutions to the cedants in order to address their needs. I’ve found as a buyer, prices are one thing, but the creativity that it’s brought to try and address our risks has been the best advantage that’s come out of it.”

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