In the past 18 months, an estimated $10 billion of new capital has entered the reinsurance market and changed the nature of the sector's capital structure, according to “Capital Stewardship: Charting the Course to Profitable Growth,” a mid-year market report from Guy Carpenter.
According to the global risk and reinsurance specialist, the surge of “convergence capital,” in the form of catastrophe bonds, structured industry loss warranties (ILWs) and collateralized reinsurance, has resulted in double-digit rate reductions during mid-year renewals, and been driven by institutional investors seeking access to a comparably high-yielding, noncorrelated assets as part of alternative asset-management strategies. This segment of the reinsurance market now accounts for $45 billion of capacity, which is approximately 14 percent of the global property catastrophe limit purchased.
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