We are well into the new year now and it is likely that
scalability will be one of the buzzwords of 2015 for the
reinsurance market. In an increasingly competitive market,
participants are looking to access more and better quality business
at lower cost – having scale (whether achieved by way of
merger and acquisition or some other means) is one way of achieving
this.
This is likely to drive a structural change in the market
– if so, a key reason for this change will have been the
availability of so-called alternative capital.
Alternative capital
Hedge funds, pension funds, sovereign wealth funds, private
equity firms and other institutional investors have invested in the
insurance market for a while, particularly the reinsurance market.
This investment of alternative capital has typically been
channelled into the market through the use of cat bonds, sidecars,
collateralised reinsurance products and other insurance linked
securities (ILS).
