“Traditional reinsurance market clients bought limits and struc- tures very comparable to last year,” Didita says, explaining that one reason for this was the presence of attractive pricing for covers. Some other factors being weighed by experts, Didita says, are the presence of excess capital and the absence of large-scale loss events in the United States. Tim Pollis, a fellow of the Casualty Actuarial Society and a vice president at Willis Re in Minneapolis, agrees. “The mar- ket seems to be overcapitalized for P/C reinsurance in total. On top of that, some reinsurers are reallocating capital in- ternally from casualty towards property, where the rates aren’t as soft and the tails are shorter,” he says, noting that “within property reinsurance, this increases the overcapitalization.”
At the same time, the alternative risk
transfer market, in which cat risk is seen
as an investment vehicle, has exploded. Re-
insurers represented 25 percent of investor
market share in 2010, while funds dedicated
to insurance-linked securities took 46 percent.
Low interest rates and difficult traditional bond
markets have helped to encourage investors to look
at the securitization market. The Cayman Islands
are the leading offshore market for listed catastrophe
bonds. There are more than 70 bonds, with a value total-
ing more than $7 billion, listed on its stock exchange. This
dwarfs Bermuda’s less than $2 billion market for cat bonds,
prev ention
When it comes to managing
weather risk, forewarned increasingly
means forearmed.
