New capital pouring into the casualty reinsurance market is “a possible game-changer in long-tail lines”, Willis Re Global Head of Casualty Andrew Newman says.

It offers investors lower costs of capital and improved investment yields integrated into the pricing model, he says.

It has also led to a much wider choice of reinsurers, with increased supply creating more competition in terms of coverage, structure and pricing.

The new capital, in search of “non-correlating returns” – returns not linked to the stock market – has entered the casualty space as it did the property catastrophe market, Mr Newman says.

It is pouring in from traditional property catastrophe reinsurers looking to offset rate reductions in their own sphere and also from capital markets, via insurance-linked securities and catastrophe bonds.

However, Mr Newman warns the new capital is untested, and all capital entrants should be scrutinised given the significant time lag of casualty business as a long-tail line.

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