Conditions primed for increased use of alternative reinsurance capital: GC’s Rousseau

Reinsurance market conditions are primed for an increasing turn towards alternatives, in sourcing capital and risk transfer solutions, according to Laurent Rousseau of Guy Carpenter.

Speaking at an event in Baden-Baden yesterday, Rousseau, the CEO of Europe, Middle East & Africa and Global Capital Solutions at the reinsurance broker, explained that demand for alternative capital is rising and its use is expected to rise in tandem with this.

Rousseau explained that market dynamics are repositioning reinsurance back towards its core function as a mechanism for managing severity rather than frequency.

In addition, Rousseau highlighted that conditions are currently primed for an increase in the use of alternative capital, as well as alternative reinsurance structures to meet clients’ risk transfer and management requirements.

Rousseau concluded, “In today’s world, it is imperative that we establish clear alignment between all market stakeholders. We must always ensure that we deliver value for insurers and their insureds.”

Also participating at the event, Thierry Léger, CEO of reinsurance firm SCOR, said that alternative structures are key to SCOR’s strategic approach, delivering intrinsic value to the reinsurer in facilitating more effective capital management solutions.

Léger stated, “At SCOR, we tailor solutions to the needs of our clients to help them optimize 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.”

Eveline Takken-Somers, the Lead Portfolio Manager for Insurance Linked Investments at pension allocator PGGM noted the importance of alignment for investors in reinsurance.

Takken-Somers said, “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.”

The final participant at the event in Baden-Baden was Burkhard Keese, CFO, Lloyd’s of London, highlighted the market’s use of alternative capital through the London Bridge 2 ILS structure and noted the importance of establishing metrics to help investors understand how allocating to reinsurance can benefit them.

He noted that London Bridge 2 enhances the accessibility of the Lloyd’s market to the investment community, reiterating something he said at our London conference in September, that the Lloyd’s ILS structure has a significant pipeline of new capital arrangements underway.