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Alternative reinsurance capital set to expand, Guy Carpenter says
Broker Guy Carpenter executive Laurent Rousseau links the growth of ILS and related structures to the post-Hurricane Andrew evolution of the risk transfer market and highlights limits around modeling and pricing.
Alternative reinsurance capital routed through insurance-linked securities and related collateralized structures is expected to keep expanding across the reinsurance market, according to Laurent Rousseau of broker Guy Carpenter.
Rousseau, CEO of Global Capital & Advisory for Europe and IMEA at the firm, made the comments during Mercer’s Critical Thinking podcast, describing how the risk transfer market evolved after 1992’s Hurricane Andrew and how the event helped drive the creation of the ILS and catastrophe bond markets.
He said Hurricane Andrew also contributed to Bermuda becoming a hub for traditional capital and traditional reinsurance, with financial investors increasingly viewing natural perils as a diversified source of risk as the catastrophe bond market took off in the early 2000s.
Looking ahead, Rousseau pointed to the growth since the mid-2010s of less liquid alternative capital structures, including insurance-linked sidecars and more ground-up insurance vehicles, while also noting tensions tied to capabilities needed to model and price insurance and reinsurance risks.