The inflexibility of traditional reinsurers has allowed new capacity to enter the cat space, and it will not disappear once the short-term opportunity abates, believes property-cat specialist broker TigerRisk.

Capacity from hedge funds, private equity, pension funds and other sources of capital has come into the industry in the past year through vehicles such as new start-ups and sidecars. The low interest rate environment has made the uncorrelated returns in the cat reinsurance market relatively attractive.

“The new capital coming into the reinsurance business is significant and it will continue to come in. It is great for the business,” says Rod Fox, CEO of TigerRisk. “I always felt the insurance business was 10 or 15 years behind other financial companies, and that will continue to evolve and get more sophisticated.”