Reinsurance executives gathering for their annual get-together in Monte Carlo this weekend will be considering their response to increasingly popular alternative insurance-linked investments that are driving down prices in the industry.
Investment funds looking for higher yields in a low-interest rate environment have funnelled billions of dollars in recent years into so-called “catastrophe bonds”, which are sold by insurers to share the risk they take on for natural disasters.
Reinsurers, whose business is to help shoulder the risks faced by insurers in exchange for part of the profit, have seen their pricing power diminish and their relevance threatened.
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