Tuesday, December 29, 2015

Uh Oh:"People are starting to see insurance as an asset class, Lloyd’s Chairman"

Remember when the friendly guy from Goldman first showed you the "The Case for Commodities as an Asset Class" PowerPoint, Mr. pension fund manager? A beautiful spring day in 2004?

"After that dotcom disaster a few years ago, boy what were we thinking, all you really want is a non-correlated place to pick up some return and since the CFMA we can do stuff with the GSCI--it's been around for 15 years you know--you wouldn't have dreamed of five years ago and if you want to go large, you can piggyback on our Commercial status with some custom swaps. I'll do the presentation and after lunch we'll take a spin in the new Viper, over 500 horses this year..."


From Artemis:
What a difference two years can make. In September 2013 John Nelson, Chairman of the Lloyd’s of London insurance and reinsurance market, had warned that mismanagement of third-party capital in re/insurance could lead to “systemic” issues in the market.

Yesterday, Nelson was quoted in the Financial Times discussing the launch of the newly planned Lloyd’s market loss and performance Index, acknowledging that insurance risk is becoming an asset class and extolling the virtues of this new or alternative reinsurance capital.

In the past Nelson has been cautious on alternative capital, the growth of insurance-linked securities (ILS) and the potential for ILS having a role in the Lloyd’s market. His commentary clearly shows that he and Lloyd’s saw the opportunity to harness ILS and the capital markets, but that they wanted to approach it in a controlled manner, so as not to introduce undue risks to the market....MORE
Also at Artemis, totally unrelated and uncorrelated:

Alternative capital influences risk tolerances in P&C re/insurance: Kroll
The growth of alternative capital in the reinsurance industry has had a “substantial influence” on risk tolerances, particularly among P&C insurance and reinsurance players, according to Kroll Bond Rating Agency (KBRA).

In an outlook for property casualty insurers for 2016, KBRA examines some of the market developments that have impacted insurers, including the abundance of reinsurance capital, the reductions in the cost of reinsurance capacity and the way that influences insurer behaviour.
As 2015 nears its close P&C insurers are looking forward to another profitable year, the third in succession for U.S. P&C, as low levels of major catastrophe losses help insurers to negotiate other market forces, such as price softening that has spilled over from the reinsurance market and the challenging investment environment, to maintain earnings performance....MORE