Insurers still finding innovative means of building capital

The insurance industry is finding non-traditional means of building capital despite the current economic situation, according to a Swiss Re and Insurance Information Institute (III) Webinar.
The financial crisis is the second largest capital event for the insurance industry, behind Hurricane Katrina, having swallowed 12.9% of capital as measured by insured loss to surplus, according to Robert Hartwig, president of the III, BestWire reported.
“Insurers have found innovative ways to raise capital,” BestWire notes. “In the 15 months after Hurricane Katrina, the insurance industry raised [US]$33.7 billion.
“Insurance-linked securities and sidecars each raised 19% of that fresh capital, or [US]$6.25 billion and [US]$6.36 billion, respectively. New companies raised 26% of that capital, or [US]$8.9 billion.”
According to Swiss Re, roughly [US]$3 billion in cat bonds can be issued this year due to investor interest in them because their performance is not tied to the overall financial market, BestWire notes.
Swiss Re’s Cat Bond Index Total Return could boast a 20% gain from Jan. 5, 2007 to Mar. 5, 2009, as compared to a drop in the S&P 500 of 38%, according to Dan Ozizmir, managing director and head of insurance-linked securities at Swiss Re Capital Markets.