Market conditions driving up interest in alternate solutions

In a symposium hosted by Guy Carpenter, renowned figures from the insurance, reinsurance, and investment sectors delved into the dynamics of the reinsurance market leading up to the Jan. 1 renewals.

The Reinsurance Symposium in Baden-Baden on Oct. 22, focusing on the theme of “The Surge in Demand for Alternative Solutions,” addressed various key issues, including how buyers are adapting to challenging market conditions and how the ongoing upward trend in pricing is fostering opportunities for alternative structures to fulfil capacity needs and encourage the inflow of fresh capital.

For the opening remarks, Guy Carpenter EMEA and Global Capital Solutions CEO Laurent Rousseau provided a comprehensive overview of the reinsurance market, exploring the factors that triggered a significant shift in rates on Janu. 1, 2023. He discussed how current dynamics are reestablishing reinsurance’s core role to manage severity rather than frequency. Rousseau also highlighted the favourable conditions for the increased utilisation of alternative capital and reinsurance structures to meet clients’ risk demands.

In his closing statements, Rousseau said that there is a necessity for clear alignment among all market stakeholders, ensuring the delivery of value to insurers and their insureds.

Core part of strategic approaches

SCOR CEO Thierry Léger was also present in the symposium, and for his presentation, he discussed how alternative structures have become integral to SCOR’s strategic approach and their inherent value in enhancing capital management solutions.

“At SCOR, we tailor solutions to the needs of our clients to help them optimise their capital management in the most efficient way. We can build on decades of experience, data and client relationships. We also develop long-term risk partnerships with alternative capital providers in SCOR overall retrocession. Alternative solutions are an integral part of our new Strategic Plan Forward 2026,” he said.

On the investor perspective side, PGGM lead portfolio manager ILI Eveline Takken-Somers outlined the company’s strategy concerning Insurance Linked Investments. She stressed the importance of aligning interests between investors and reinsurers and the need for alternative capital to yield sustainable returns.

“Today, alternative capital is structurally embedded into the reinsurance industry. It has grown to a significant size and level of importance and will continue to grow if the following conditions are met. Firstly, there needs to be sufficient alignment with traditional capital so that investors are not having to take on risks that the industry is not willing to take on. Secondly, alternative capital needs to achieve sustainable returns. In recent years, like traditional capital, return objectives for alternative capital have not been met,” Takken-Somers said.

In the final presentation, Lloyd’s of London CFO Burkhard Keese highlighted the success of the London Bridge 2 vehicle in enhancing market accessibility to the investment community. He addressed the future of the commercial insurance industry, saying that there is a need for greater transparency and efficiency, particularly in dealing with challenges like the transition to net zero.

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