Although some reinsurance industry executives believe a major loss would cause catastrophe bond investors to flee from the insurance-linked securities market, an Aon Benfield executive says such an event could draw them in further.

Executive Summary

The amount of capital that wants to be in the reinsurance space is having a far greater effect for reinsurance market conditions than the total amount of capital already in it, says Aon Benfield's Bryon Ehrhart, referring to the impact of new investors in the catastrophe bond market—investors that he and other experts believe are in the market to stay.

Bryon Ehrhart, chairman of Aon Benfield Analytics and chairman of Aon Benfield Securities, made the unusual prediction when Carrier Management asked him to share his views about the pricing levels cedents might expect to find in the traditional reinsurance market at Jan. 1, 2014.

Recalling the supply-demand analysis contained in Aon Benfield’s report on the 1/1/2013 renewals earlier this year, Ehrhart notes, “The dynamics at play used to rely mainly on capital devoted to the industry.”

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