The input of alternative capital into the global reinsurance market is continuing to increase, bringing it closer to a convergence in which traditional providers will become conduits to the capital markets, according to a panellist at the Bermuda Reinsurance conference.
Attendees at the conference, hosted by ILS Bermuda, heard that the expansion of the market has come from insurance-linked securitisation such as catastrophe bonds. Panellists, however, explained that this convergence is still in its early stages.
Michael Millette, managing partner at Hudson Structured Capital Management, commented: "We're just starting to see securitisation change the underlying industry.”
Millette explained that although the catastrophe bond market has reached roughly $25 billion outstanding, it can "take a long time for other asset classes to gestate”.
Speakers revealed that, with the increase in alternative capital over the last few years, the market has now reached $75 billion, with many funds now using collateralised reinsurance.
Dirk Lohmann, chairman and managing partner at Secquaero Advisors, said: "There's a lot of potential for securitisation to optimise insurance companies' capital structures.”
