RECAP: Where Reinsurance Meets Capital Markets
The boundaries between reinsurance and capital markets continue to intersect. These markets have created products that solve their common needs: accelerating revenue growth, leveraging capital effectively, and optimizing risk distribution. These solutions cover the full range risk solutions in insurance marketplace such as:
These solutions have become very popular. With this growth comes the need for a securitization pricing, packaging, and distribution marketplace that can operate at large-scale. And this is where Insurtech becomes critical. A recent
partnership highlights potential for emerging platforms:
"Vesttoo, a leading insurance risk transfer platform, announced that it had signed a partnership agreement with Clear Blue to supply the latter with reinsurance capacity sourced from capital markets investors, totaling a sum of $1 billion USD. The partnership is part of Vesttoo’s vision to bridge the gap between the insurance and capital markets, scaling insurance-linked investments as a source for reinsurance capacity. In addition to its AI-powered technology and expertise in fintech, insurance and asset management, Vesttoo will utilize Clear Blue’s underwriting, program management, data and analytical capabilities to facilitate faster reinsurance transactions and allow for more investors to gain access to a diversified portfolio of Clear Blue’s P&C risk, on an efficiently collateralized basis."
The challenge is for existing reinsurance intermediaries to remain relevant. Distribution challenge disruptors (Amazon in retail, Salesforce.com in enterprise software) highlight how rapidly incumbents can be displaced.
Reinsurance brokers must actively lead these emerging marketplaces. These actions must include:
providing leadership in the development of standards for these business exchanges. Similar to the role the Lloyd's has traditionally played, current intermediaries need to promote industry best practices;
investing in internal projects and insurtech innovators to leverage industry expertise, ensure compatibility with market trends, and facilitate an orderly transition to this new operating model; and
recruiting and training the next generation of brokers with the skills needed to succeed. Strong account relationship management skills combined with the ability to evaluate alternative placement options are essential to managing a profitable book of business. Future brokers will resemble financial advisors in their ability to create custom solutions.
The organizations that embrace this new channel and integrate it into their existing businesses will ultimately thrive in the new marketplaces.