Capital markets money will target casualty lines

The jury is out on whether capital market investors will ultimately find ways of taking on substantial amounts of casualty risk in the same way they have with catastrophe risks but either way there is already a knock on effect on pricing in this market.

Those were some of the conclusions of a panel discussion held at the International Insurance Society’s annual conference in London on Tuesday June 24.

Urs Ramseier, chairman of ILS specialist Twelve Capital, said he does not believe casualty risks are suited to this form of capital because of the types of triggers and short-tail investors capital markets investors prefer to make.

“Some of these long-tail risks are almost impossible to transfer,” he said. “These will stay within the traditional reinsurance business, I believe."

But others disagreed. Albert Benchimol, chief executive of AXIS Capital, said this is already starting to take place with sidecars such as Arch Capital’s Watford Re targeting this space. “I believe there are ways to access new capital for almost any type of risk,” he said.

Separately, Brad Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers (ABIR), told Intelligent Insurer that he has seen plans for risk transfer of this type including the idea of corporates eventually forming their own sidecars.

Denis Kessler, chief executive of SCOR, said whether casualty risks are moved directly into the capital markets or not, the influx of capital into property-catastrophe lines of business is already having a knock-on effect.

“We see the spill over effects,” he said. “Companies reallocate capacity away from highly competitive areas and that creates pressure on rates in liability lines. It is a ripple effect.”