Expectations of a broad hardening in market conditions, as well as the desire to bolster balance sheets in the face of uncertainty around COVID-19-related losses, underpinned much of the capital raising activity seen in 2020, according to a new AM Best report.
A new Best’s Special Report, “London and Bermuda Attract Capital as Insurance Market Conditions Improve”, reveals that private equity, industry capital and public placements all contributed to the capital inflow, supporting the balance sheets of existing players, alongside some material scale-ups and a number of true startups.
Catherine Thomas, senior director, analytics, said: “The capital inflow partly reflects the absence of other opportunities for investors. The low interest-rate environment has forced investors – particularly institutional investors – to look further afield for yield opportunities. The risk and reward calculation posed by the insurance industry in a hardening market may look more attractive to existing and new investors. This year, rates in a number of lines of business continue to harden as the market responds with increased underwriting discipline to adverse claims experience driven by social inflation in the United States, COVID-19-related losses, and in recent years, elevated catastrophe experience.”
The report suggests that it is not yet clear how the economic fallout from the COVID-19 pandemic will impact demand for insurance. Meanwhile, although pandemic-related volatility may constrain (re)insurers’ merger and acquisition activity in the short term, AM Best expects consolidation pressures are likely longer term.
To access a complimentary copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=306223.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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Senior Director, Analytics
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