The current market conditions are driving up interest in alternative capital and reinsurance structures to meet clients’ risk requirements, re/insurance specialists highlighted during Guy Carpenter’s Reinsurance Symposium in Baden-Baden.
In its symposium, the broker addressed the theme of “The rise in demand for alternative solutions”. Senior industry figures from the re/insurance and investment sectors assessed the dynamics of the reinsurance marketplace in the run-up to the January 1, 2024 renewals.
They explored how buyers are responding to challenging market conditions and how the continued upward trajectory in pricing is creating opportunities for the development of alternative structures to meet capacity needs and facilitate the inflow of new capital.
Speaking on the issue, Laurent Rousseau, Guy Carpenter’s CEO of Europe, Middle East & Africa and Global Capital Solutions, firstly addressed the factors that led to the significant pivot in rates at January 1, 2023, and noted how current dynamics are reestablishing the core function of reinsurance as a mechanism for managing severity rather than frequency.
He highlighted how conditions are primed for an increase in the use of alternative capital and alternative reinsurance structures to meet clients’ risk requirements. And warned that “in today’s world, it is imperative that we establish clear alignment between all market stakeholders.”
Thierry Léger, SCOR’s CEO, also spoke on the subject, and explained how alternative structures have become a core component of SCOR’s strategic approach and highlighted their intrinsic value in facilitating more effective capital management solutions.
He said: “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.”
Investors like Eveline Takken-Somers, Lead Portfolio Manager ILI, PGGM, highlighted the importance of establishing clear alignment of interest between investors and reinsurers.
She commented: “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.”
Finally, Burkhard Keese, CFO, Lloyd’s of London, outlined the success of the London Bridge 2 vehicle in enhancing the accessibility of the market to the investment community, noting its ability to match investor needs with underwriting needs effectively.
“The commercial insurance market must continue its progress towards becoming a more transparent and efficient place to do business to deal with upcoming challenges, like the transition to net zero,” Keese said.
