The changing dynamics of the reinsurance sector have created challenges and opportunities in equal measure. Stephan Ruoff, CEO at Tokio Millennium Re, says reinsurers must modernise and adapt to recent trends to stay relevant

How is alternative capital shaping the global reinsurance market?

Over the past ten years, alternative capital has played a significant part in changing the traditional reinsurance landscape in a long-term and sustainable way. The amount of capital provided by insurance-linked securities (ILS) funds, investors and structures has reached a new high of $95bn and now contributes 16% of global reinsurance capital, according to recent statistics from Aon Securities.

There has been a shift from reinsurers acting as pure risk carriers to also facilitating the match between risk and capital. We have seen examples of reinsurers re-evaluating their own strategies to access reinsurance capital in all its diverse forms. This has been done either via setting up ILS managers or by becoming a service provider and a risk partner to ILS funds, which is the route TMR has chosen alongside its insurance management subsidiary.

This dynamic will continue to put pressure on markets but has also forced reinsurers to stay relevant by finding new and innovative ways to remain competitive and access new risk.

Further down the road, this mix of capital will become the new normal, and there will be simply ‘pools of capital’ looking for a good match with ‘pools of risk’. Providing third party capital access to risk pools they normally cannot easily access can be a key differentiator for reinsurers in how they work with capital markets.


What are the challenges of marrying up new technologies to the industry’s objectives?

The arrival of insurtech and a new digital era has presented the industry with a big challenge of modernising its products and systems. Reinsurers must challenge their place in the value chain and their business models by identifying parts that can become digital. Finding the appropriate insurtech solution is only a subsequent step in order to create greater efficiency through technology.

The industry is introducing propositions via strategic partnerships, equity investment, or home-grown bespoke development. However, to be successful and address the digital challenge, any insurtech initiative must combine the reinsurance industry’s strong analytical infrastructure and deep customer relationships with the vision and knowledge of the technology firms.


The reinsurance market has faced a lot of change over the past ten years. What is the next frontier in reinsurance?

Making reinsurance risk easily tradable is the next logical step when matching capital and risk, however, the entire value chain needs to become more efficient.

This can be done with the help of data mining through Artificial Intelligence, which will boost risk quantification and predictive analytics. The industry has already started to develop solutions that enable shared platforms using blockchain initiatives, and with better data standards plus more widely shared platforms, more risk can be insured.

Traditional reinsurance combined with capital markets already provides a deep pool of capital, but by encouraging and facilitating an environment that sees risks more easily traded, this could help address and reduce remaining protection gaps. For example, parametric trades are more easily consumable by wider participants in the capital markets. This could help with underinsurance in many business lines and societies, such as developing nations, natural catastrophe risk and cyber.