The reinsurance market is still ahead of historical lows, despite the buying pool decreasing every year for the last 10, according to CEO of EMEA operations for Guy Carpenter, Nick Frankland.
“Since 2009, we have seen an overall reduction of just 25 percent—this in our view is the more meaningful figure, particularly given that 2009 was a profitable period for the industry,” said Frankland.
Speaking at a press briefing in London, Frankland claimed that traditional capacity “remains strong in all areas and appetite is, if anything, increasing as reinsurers look to maximise both relationships with clients and class diversification”.
At the same event, Guy Carpenter’s head of EMEA strategy management Chris Klein highlighted the increasing influence of the alternative capital market.
He commented: “The collateralised reinsurance market we believe is now providing 50 percent of the established limits for general treaty and property catastrophe covers in the property retro arena—this is a significant figure.”
Klein also stated that, from an EMEA perspective, the majority of the new capital is focused on the retro markets and US property catastrophe peak perils.
Klein continued: “If you look at Europe, there is a lot of good quality, well-embedded catastrophe capacity in the region. These perils are more complex, spanning multiple territories and some of these are not very well modelled.”
“Insurance-linked securities penetration in EMEA is primarily confined to larger, multi-line, multi-national insurance groups and reinsurance groups operating out of Europe, as well as some industry and public bodies.”
The speakers stated that Guy Carpenter aspires to move more towards the consultancy-based model supported by “the transactional power of being a traditional reinsurance broker”.
Frankland concluded: “The business generally will need a reset. It needs to work to a lower cost of capital model which will see a period of increased creativity around the use of additional and alternative capital instruments, as well as enhanced return vehicles.”
“We are poised on the brink of a fundamental change in this industry and the next 12 months are likely to confirm that.”
