A positive pricing momentum for reinsurance will help alternative capital – capital from investors in the form of collateralized reinsurance, catastrophe bonds and reinsurance sidecars – to restart growth after five years of poor returns, according to a recent Moody’s report.
Over the past 15 years, alternative capital has grown from approximately $22bn at year-end 2007 to around $95bn at Q2 2022, and currently constitutes about 15% of total reinsurance capital.
It is now extensively used by reinsurers to lower their own total cost of capital, manage peak risk exposures, improve risk-adjusted returns and enhance their overall competitive positioning in the global reinsurance sector, according to Moody’s.
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