Pension funds invest in traditional reinsurance companies- report
Citing research, Bloomberg reported that the global pension fund industry has poured money into traditional reinsurers. The USD 30 trillion industry financed protection against catastrophes interest rates fell. Marsh & McLennan Cos reinsurance brokerage Guy Carpenter reported that in the 18 months ending June, institutional money worth USD 10 billion were coursed to insurance-related investments.
This has directly influenced the price of coverage for catastrophic risk, according to the report. LGT Capital Partner revealed that catastrophe bonds would be able to provide yields of up to 15%. Last year, coverage coming from pension and hedge fund capital reached up to USD 45 billion. Guy Carpenter said this comprised 14% of the overall global property catastrophe limit bought. Insurance investments coming from pension funds resulted to lower prices despite reinsurers pressing for higher rates spurred by extreme weather.
Guy Carpenter Global Head of Business Intelligence David Flandro said, "This is the biggest change to the reinsurance sector's capital structure in the last 20 years. Catastrophe reinsurance is relatively high-risk, high-return. Pension funds are looking for direct access. Most of the capital is here to stay."