Line between traditional and alternative capital blurring: S&P

The line between alternative and traditional capital in the reinsurance world is blurring, according to a new report from Standard & Poor’s Ratings Services.

The rating agency said that the reinsurance sector is adapting to the influx of alternative capital in recent years by providing innovative solutions and lower prices to reinsurance buyers.

Standard & Poors added that as capital has entered the reinsurance market it has opened up more opportunities for buyers.

A report by the rating agency said: ’The covered perils are increasing and event definitions are becoming broader. We continue to caution that any growth of the alternative market should not come at

the expense of looser underwriting discipline and less due diligence’.

Standard & Poors added that it expects the alternative capital market to continue to innovate and push boundaries because of low natural catastrophe losses in recent years and the sheer quantity of capital in the reinsurance arena.

This will ultimately affect the cat bond market, Standard & Poors added.

Standard & Poor’s credit analyst Maren Josefs said: “As we welcome this innovation, we continue to caution that any growth should not come at the expense of looser underwriting discipline and less due diligence.”

The full report is available here.