Alternative capital has irreversibly changed the market
The influx of alternative capital into the reinsurance market has irreversibly changed the structure of the market.
This is according to Ravi Arps, vice president and founding member of investment banking advisor Stonybrook Capital.
"There are two schools of thought with respect to alternative capital. The first school is that alternative capital hasn’t yet experienced material events in the form of frequency and/or severity. It’s thought that as soon as the industry goes through this, within alternative capital, we could see retrenchment,” said Arps.
“The second school of thought is that the flood of alternative capital has structurally changed the market. Therefore, although there may be some retrenchment in response to cat events, the capital is here to stay.
“In my opinion, although it’s difficult to offer a prediction on the future, the market has changed structurally and it will be interesting to see how this plays out.”
Arps added that prolonged competitive market conditions mean that companies are now looking at what they can do strategically in order to grow.
“We are not seeing a lot of difference between insurers and reinsurers looking for advice, simply because there’s so much merger and acquisition activity taking place across the market. For companies of moderate size, competition has become very tough over the past few years," he said.
