Plentiful traditional capacity could stifle demand

There is more talk than action about the increasing influence of capital markets capacity on the reinsurance markets, according to Swedish insurer Länsforsäkringar’s reinsurance general manager Tor Mellbye.

While capital markets capacity plays an important role, Mellbye contends that the ready availability of traditional reinsurance capacity may negate the need for additional sources for smaller programmes.

Speaking to Global Reinsurance yesterday, Mellbye said: “The capital markets are useful for very big programmes or when you have big need for some diversification. “If you have big cat capacity needs it might make sense. But I think in today’s market there is so much capacity and fairly low prices.” He added: “I think there is quite a lot of talk.”

Mellbye noted that the number of traditional reinsurers is staying constant, with exits being offset by newcomers to the market. However, he noted that there had been some reduction in European property-catastrophe capacity in Europe. “Last year, you saw some reduction in capacity at Lloyd’s - not because it had less money but because it changed its view on cat exposure in Europe,” he said.