Alternative capital will creep closer to traditional market

The alternative capital currently flooding the market will further encroach on traditional products and markets, as billions of dollars of capacity continue to look for risk.

This is according to Justin Wallen, managing director Hexagon PCC Group, based in Guernsey, speaking at Guernsey Finance’s ILS Insight event in London yesterday, March 18, 2015.

Wallen said that the alternative market will become closer to the traditional market and will push the latter even harder, adapting the way it conducts its business.

“We will see aggregate covers written more, lines given to frequency losses written on a sideways basis, and some will start to deal with large lines such as casualty,” he said.

Another panellist, John Rowson, executive director of Aon Insurance Managers, made reference to the innovation and diversification strategies already being demonstrated by large funds such as Nephila, which recently saw the money manager enter into a deal where, facilitated by wholesale broker Amwins, it will take a percentage share of select property insurance covers brokered through Amwins.

Rowson also spoke of the budget and the Government’s tax ideas to foster the UK insurance-linked securities (ILS) market.

“There are vague commitments at the moment, but it’s certainly being discussed,” he said.

Ben Canagaretna, group chief actuary at Barbican, agreed, saying that he felt it was a positive thing that reinsurance and ILS was being mentioned in the budget.

However, a member of the audience was less convinced about the UK’s abilities and said that it was more a matter of regulation than tax.

He said that in the UK it would be possible to set up a special purpose vehicle (SPV) tax free, however, added that as a matter of efficiency a jurisdiction such as Guernsey would be far more efficient.