Reinsurance companies have reaped the benefit of new investment from the likes of hedge funds, sovereign wealth funds, pension and mutual funds. These deals may be structured as catastrophe bonds, collateralized reinsurance and reinsurance sidecars, separating the investment from the rest of the capital supporting a reinsurer.

"Alternative markets in the past 10 years have established themselves as an important supplement to the traditional reinsurance market, particularly in catastrophe reinsurance," says James Lynch, chief actuary, senior vice president of research and education, Insurance Information Institute. Most observers believe their presence has dampened rates.

According to Brian Schneider, senior director, Fitch Ratings, as a result of recent large catastrophe events, there's been a decline in alternative capital in the insurance linked securities (ILS) space to $93 billion in June 2019, down from $98 billion at the end of 2018. Currently, he says, 15% of total global reinsurer capital is coming from alternative markets.

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Rosalie Donlon

Rosalie Donlon is the editor in chief of ALM's insurance and tax publications, including NU Property & Casualty magazine and NU You can contact her at [email protected].