Swiss Re expects demand for nat cat reinsurance coverage to double in high-growth markets

Demand for natural catastrophe reinsurance coverage in high-growth markets is expected to double and to increase by 50% in mature markets by 2020, Swiss Re said this week.

Pricing rates are experiencing decreases in that area, but are expected to stabilize in 2014, the reinsurer also noted.

“Amid the continued low yield environment, alternative capital continues to enter the re/insurance market in search of attractive investment opportunities,” the company said. “70% of this capital focuses on U.S. natural catastrophe risks while other business lines are less affected”

Alternative capital in the U.S. natural catastrophe market is comparable to what it was right after hurricanes Katrina, Rita and Wilma, Swiss Re said. Alternative capital also still needs to be tested in case of increasing interest rates or large losses from natural disasters, the company added.

“We take the inflow of alternative capital seriously, but we are not alarmed by it,” noted Swiss Re’s chief underwriting officer, Matthias Weber.

“Swiss Re can take advantage of its capital markets expertise and – at the same time – compete successfully as a full service provider,” he said. “Smaller, less diversified reinsurers, however, will be under significant pressure.”