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Alternative capital in insurance industry hits $95B in first half of 2018: Swiss Re

Alternative capital in the insurance industry reached $ 95 billion in the first half of 2018, according to a report Tuesday from Swiss Re Ltd.

Such funding now accounted for 22% of the total supply of property catastrophe limits in 2017, having more than quadrupled since 2010, and now supports an estimated annual premium volume of roughly $ 5 billion, Swiss Re said.

This compares to global capital for the traditional reinsurance segment of approximately $ 340 billion based on an annual premium volume of $ 270 billion, the reinsurer added.

Within that 22%, collateralized reinsurance makes up 11%, catastrophe bonds 7%, side cars 3% and industry loss warranties 1%, according to Swiss Re.

While the alternative capital sector did see its share of 2017’s historic catastrophe losses, this did not deter investors from providing fresh capital.

“The ILS [insurance-linked securities] market remained liquid throughout 2017 and investor capital was more than replenished,” Swiss Re said, noting “a mix of both established and opportunistic new investors have contributed to the segment’s growth.”

Further growth in the amount of such funds is expected and their availability could help smooth market volatility, according to the reinsurer.


“We predict that AC [alternative capital] will continue to grow and curb the volatility of the overall reinsurance underwriting cycle,” the report said. “We believe that losses will be more widely spread with the help of institutional investor capital and the ease at which capital can enter and exit the AC sector.”

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