Intelligent Insurer Monte Carlo roundtable


WEDNESDAY 16.09.15


The evolution of alternative capital


Intelligent Insurer magazine held a roundtable discussion at the Monte Carlo Rendez-Vous yesterday (Tuesday September 15) on alternative capital. A panel of experts discussed the different models that have emerged, their pros and cons and the future shape of this market.


A t


the roundtable discussion a panel of senior executives debated the issues that


the alternative capital market is facing at the moment, ranging from the impact of new forms of capital to the participation of hedge funds, to the general evolution of the market. Dawn was breaking over Monte Carlo as


the attendees assembled for the roundtable, and the coffee supplies diminished sharply before everyone was seated. Moderator Wyn Jenkins, the managing


editor of Intelligent Insurer, started proceedings by asking the panel to discuss the main business models in the re/insurance market at the moment and whether a spectrum that included hybrids existed in terms of their relationship with alternative capital, or whether specific classes of business were emerging. Robert DeRose, vice president, reinsurance


ratings at AM Best, said that he didn’t really know if there were any true pure traditional reinsurers left


now, with PartnerRe or


Transatlantic Re being potentially the only examples as both remain primarily focused


on traditional reinsurance. Yet both also have capital market initiatives as well. “The reality of the situation is that insurers, to one degree embracing


alternative sources of Attendees all


or another, are capital,


whether it be investing in insurance-linked securities (ILS) or managing capacity for third party investors through a sidecar type of vehicle,” he said. “They recognise that they have to move


with the market and find more efficient ways to access and deploy capital so that they can better compete in the current market environment.” DeRose added that in his view the answer to the question of just what a hybrid is, is that it is indeed a spectrum. There are those which lean towards the traditional side of the market, which might include firms like Transatlantic Re, and then there are companies that only offer fully collateralised product which source capacity from various investors. Many other varieties on these themes fall in between. Martin Bisping, global head of non-life risk transformation at Swiss Re, pointed out


1. Luca Albertini, CEO, Leadenhall Capital 2. Martin Bisping, global head of non-life risk transformation, Swiss Re 3. Robert DeRose, vice president, reinsurance ratings, AM Best 4. Urs Ramseier, chairman, Twelve Capital


Chair: Wyn Jenkins, managing editor, Intelligent Insurer


that the evolution of alternative capital goes back about 15 years or even a bit longer, and that it was a time when there was a shortage of capacity after, first, Hurricane Andrew and then hurricanes Katrina, Rita and Wilma. “Reinsurance companies especially had the


desire to lay off some of their peak risks to a new form of capital; that’s why the reinsurance companies were


actually quite keen and


pioneered the development of that market— and quite successfully.” Bisping added that the first movers of capital funds were


alternative also very


successful in educating their investor base in that asset class. He said that currently there is an overcapitalised market—and the capital is still flowing in. As a result there is price compression in many


areas, not just in the traditional reinsurance market but also in the alternative capital space, and that cat bond spreads have declined. He added that the cat bond market is showing some discipline. He felt that there is a search for risk at the moment, but also a search for yield.


A conservative profile Luca Albertini, CEO of Leadenhall Capital, said that from his perspective when it came to traditional he tried


insurance-linked investments to keep to the most conservative


investment profile possible, due to investors not wanting to take on too much investment risk. Urs Ramseier, chairman, Twelve Capital,


said that in order to understand the dynamics it was important to understand the motivation


14 | MONTE CARLO TODAY | DAY 4: Wednesday September 16 2015 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


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