The flood of new capital into reinsurance is continuing to reshape the market, according to a report from Guy Carpenter.

In the past two years about $US20 billion ($22 billion) of alternative capital has entered the market via insurance-linked securities (ILS), funds and sidecars, hedge fund-related reinsurance companies and collateralised vehicles.

“The amount of limit placed utilising ILS and collateralised products continues to grow and some markets are broadening the lines of business and product focus,” the reinsurance broker says.

Issuance of “Rule 144A” catastrophe bonds in the first half of this year grew to a six-month record of $US5.7 billion ($6.4 billion), continuing “remarkable” overall growth.

New sponsors were American Strategic Insurance Group, Everest Re, Generali, Great American, Heritage, Sompo Japan Nipponkoa and Texas Windstorm Insurance Association.

Guy Carpenter says innovations in the past year include the transfer of risk directly to capital markets without an intervening traditional insurance company.

“As the quality of catastrophe modelling continues to increase and as capital market investors become more comfortable with innovative terms and conditions, more forms of risk may directly access the capital markets in ILS form.”

Insurers and reinsurers have so far looked to capital markets mainly for property catastrophe risks, but hedge fund interest may lead to expansion into longer-tail, less volatile lines.

Collateralised reinsurance markets are also changing the way counterparty risk is managed, Guy Carpenter says.