The convergence industry expects another rosy year according to the annual Trading Risk Market Survey, with investor inflows forecast to continue their momentum in 2013, although strong capacity is expected to put pressure on spreads.
After a bumper fundraising year in 2012, survey respondents were bullish on the prospect of further growth, although expectations have moderated from this time last year.
One commentator said that low interest rate levels were the main driver of capital expansion but, overall, participants rated capital market interest in reinsurance as more of a long-term play than an opportunistic one.
With ILS demand high, another commentator said investors would lap up any transaction, whether it was a good deal or not.
"It's like lemmings heading over the cliff," he said.
Meanwhile, the industry said for the second year running that the key to stimulating market growth lay on the supply side.
Just under a third prescribed maintaining a healthy and constant pipeline of deals as the route to growth, whereas back in 2010 respondents were equally concerned about broadening the investor base.
But a growing minority portion of respondents picked boosting diversity in perils and territories as the main growth driver in a market saturated with US wind risk.
However, if cat bond issuance does not reach expected levels, ILS funds could shift more attention to the industry loss warranty (ILW) sector. Half of the survey respondents believed they would provide over 50 percent of ILW capacity this year.
The survey of Trading Risk subscribers was conducted in December 2012. Some 44 respondents completed the survey and we thank you for your participation.
Click on TR Market Survey 2013 to view