This was our inaugural Sifma roundtable, hosted during what turned out to be a bumper conference for the industry with a record level of participants taking over the hotel corridors to debate the growing prominence and power of alternative market capacity.
Indeed, this theme has been one of the major talking points of the reinsurance market over the past 12 months, as the impact of alternative capacity has begun to reshape the traditional business model.
But, as one of my Insurance Insider colleagues who sat in on our roundtable discussion commented, one of the most interesting aspects of this trend is how the competition is played out within the alternative sector itself, rather than across the two markets.
One of the major themes of debate on the day was whether cat bond supply will be able to keep pace with investor demand or whether growth in the collateralised reinsurance market will continue to accelerate ahead of ILS issuance.
This was much a concern for the sponsors in attendance, such as Florida Citizens Property Insurance and the California Earthquake Authority, as it was for the dealers and investors around the table.
The California Earthquake Authority's chief financial officer Tim Richison warned that reluctance to step outside the familiar will steer many reinsurance buyers towards collateralised reinsurance rather than the cat bond market.
As ever, cost and familiarity were seen as the most significant obstacles to changing these buying practices.
But this excess of demand over supply is helping to create pronounced pressure on cat bond pricing, speakers noted.
This "new paradigm" of lower prices should help make risk transfer more attractive.
However, the attendees argued that the market was still enforcing disciplined pricing practices, although some were wary on whether this discipline was being maintained in other market niches, with the commoditised industry loss warranty market currently at the forefront of pricing pressure.
But as one participant noted, these are not "economically reasonable times".
The roundtable group also debated the trend for reinsurers to enter the funds management industry. These ventures pose a number of challenges for reinsurers, as they are faced with a new skill set and potential conflicts of interest. Nevertheless, the expertise these vehicles bring to the market was seen as a positive for the capital markets sector.
All the participants at our roundtable are clearly highly committed to growing the reinsurance market - and we trust that facilitating conversations like these will help their goals.
Enjoy the read,
Fiona Robertson
Editor,
Trading Risk
To download the Trading Risk Sifma Roundtable 2013 please click here.