ALTERNATIVE CAPITAL NEEDS 'STRUCTURAL BREAKTHROUGH'

The alternative capital market will continue to see slow growth unless it can refocus on closing the looming protection gap, Fitch Ratings has warned. The market has “stalled” following a long period of double-digit growth rates and the rating agency now expects “limited” growth for the rest of 2020 and into 2021. The slowdown has been due to significant catastrophe bond maturities, limited new sponsor emergence and investor retrenchment in collateralised reinsurance, as well as large losses in that market over recent years. For alternative reinsurance – consisting of cat bonds, industry loss warranties, sidecars and collateralised reinsurance – to regain its footing, Fitch said there needs to be a “structural breakthrough” in which alternative insurance serves to narrow the protection gap between economic and insured losses from natural catastrophe events.