The “bonanza” is over, ILS capital more disciplined: Swiss Re CEO Mumenthaler

While there was a bit of a “bonanza” in terms of capital pouring into reinsurance from the capital markets a few years ago, things have now become more balanced and ILS capital appears more disciplined, according to Swiss Re’s CEO Christian Mumenthaler.

Speaking last week, during the reinsurers’ earnings call, Swiss Re CEO Mumenthaler said that he sees a better environment emerging, where the capital markets and insurance-linked securities (ILS) are happy playing higher-up and he said his firm is happy to see the continued growth of the asset class in 2023.

Discussing reinsurance rates and what may happen later this year, Mumenthaler said that it’s too early to tell.

But, he explained that, “We have to take into consideration that there is probably less alternative capital interested with this higher rate environment. There’s other opportunities for capital to be invested.”

He said he expects the rate environment trend to continue, but it’s hard to say at what pace.

On capital in reinsurance, he noted that it’s hard to tell exactly how much is available in the market at any one point in time, but acknowledged that “We’ve seen less capital from outside the industry flow into the industry.”

Adding that, “In the ILS market, which is higher up and where there has been less losses, there’s still activity and we think that’s very good.

“I mean, overall we believe capital markets will be needed to cover all the future needs in this space.”

Going on to say that, “It’s a much more disciplined market and then, as we see the more disciplined capital marketplace coming in, and actually backing reinsurers and saying okay, we prefer to be in the back because you know the business.

“So there’s still capital coming, but it’s a different type.

“There was a bit of a bonanza, two to three years before, less discriminate, and now it seems to balance out.”

Finally saying, “But generally, capital has many more opportunities now than then in the past. So that pressure is lower, even though yes, in the ILS space, you see activity and we actually are happy with that.”