Intelligent Insurer Monte Carlo roundtable


of the investors in providing capital to market. The majority are pension funds that invest for diversification reasons, with others having slightly different types of motives, such as high net worth individuals investing for capital gains tax reasons. “This hedge fund re model, basically using


‘the float’ and investing in the financial markets, is nothing new—Warren Buffett has been saying this for 30 or 40 years now and it’s been around for as long as reinsurance has existed,” Ramseier said. He added that


it was interesting that on the private ILS side there were now signs of a


“This hedge fund re model, basically using ‘the float’ and investing in the financial markets, is nothing new— Warren Buffett has been saying this for 30 or 40 years.” Urs Ramseier


slowdown, with investors asking whether it was a good idea to invest at current levels. Some investors might now take some chips off the table, he suggested. Bisping said that at the moment the ILS


market was largely confined to the US, or to peak perils, where the margins meet the return hurdles. “What I expect is that the hedge fund re model remains a niche market—I cannot see


it becoming the big


probably be a handful of companies which can successfully run that kind of market.” This met with the agreement of DeRose,


who added that one of the challenges for these companies was funding the underwriting talent. He said that he could think of a number of hedge fund companies that might want to get involved in this area of the market, but who would have trouble recruiting the underwriting talent required, which is why he thought that more partnerships are emerging.


The float The panel was then posed the question: if the Warren Buffett way of doing business has been around for so long, why has the term ‘the float’ only recently appeared? According to Ramseier, insurance companies had in fact done this kind of business until 2001/2002, after which the crash of the equity markets forced them to be more


cautious. 3


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thing. There will


“Munich Re, Swiss Re, the oldest companies, had to raise capital because their equity exposure was too high—this was the model prior to 2001/2002, basically taking big equity risk on the left side of the balance sheet, credit risk and so on. “Now, they have significantly reduced the


risk on the asset side. And with Solvency II, that’s driving everyone in the direction that you should have very little investment risk on the investment portfolio—otherwise you incur capital charges.”


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DeRose added that Warren Buffett had


the advantage of having been investing for years, giving him a huge balance sheet, so that he was able to match the more conservative investments with insured risks. The panel agreed that alternative capital


was here to stay, but that it was a question of bringing in the full benefits of diversification, as the market absorbed both the advantages and the disadvantages that products like cat bonds bring to it. n


DAY 4: Wednesday September 16 2015 | MONTE CARLO TODAY | 15


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