Reinsurance Association of America (RAA) president Frank Nutter comments on the evolution of the “blended model” in reinsurance with alternative capital contributing to the way reinsurance provides capacity to insurance companies, not just in the catastrophe area. He sees reinsurance companies diversifying into the insurance business, viewing capital markets as “largely competitive…and complementary.”

Mr. Nutter admits that reinsurers have struggled with growth in recent years. He sees opportunities for reinsurers in finding more efficient use of capital to compete with capital markets that expect a different return on capital than traditional reinsurance. The RAA has been asked to look into risk transfer opportunities in government programs, such as the Florida Hurricane Catastrophe Fund, Florida Citizens, Louisiana Citizens, the National Fund Insurance Program (NFIP), the Import-Export Bank (ExIm). He points to the successes with the NFIP, which purchased private reinsurance in 2016 and 2017.  He believes the NFIP and FEMA will be looking to expand their risk transfer programs this year, mostly through the use of alternative capital.

“[Reinsurance] has been pretty resilient.” Mr. Nutter sees a “new normal”, with significant catastrophes, additional capacity affecting price, along with core capacity that the sector has traditionally provided.

For more on the U.S. reinsurance market, visit the RAA website.

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