Here we review recent GC Capital Ideas’ top stories on capital management.
Risk Preference Function - Embedding Risk-Reward in Capital Allocation: Capital allocation decisions are among the most important decisions made by company management. Through our own research and thought leadership and our observance of best practices at clients around the world, Guy Carpenter’s Enterprise Risk Management Advisory practice has compiled a set of leading practices around capital allocation for (re)insurers.
Adapting to an Evolving Market of More Permanent Capital Market Capacity: A new capital management paradigm is challenging the traditional reinsurance model. Historically, significant market losses from major catastrophic events and low investment yields were a catalyst for an improved rate environment. Faced with current economic conditions, reinsurers are finding it more difficult to generate adequate returns in excess of their cost of capital, and are seeing an increased competitive threat from alternative capacity from the capital markets. New money appears to be more permanent and therefore limits the firmness and duration of any improved rate environment.
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