Investor's Guide To Re/Insurance

A recent article suggested that at the end of Q2 2022, the total "dry powder" AUM available for investment by Private Equity has surpassed (according to Pitchbook) $1.2 trillion.

So, is so much powder dry?

A typical response that I have heard from PE firms is that "we do not want to try catching a flying knife." This implies that global economic times are both volatile and uncertain. That rising interest rates are raising the investment bar, and most firms have chosen respite versus deploying capital.

So, while PE and other investors are open for business, their selection of investments has trended towards safer harbors and more certain returns. Investing in the global re/insurance industry could very well be that safe harbor.

Re/insurance Market Returns

Re/Insurers premium and terms and interest rates rarely align.

• It is normal to anticipate that higher interest rate environments will see lower premium rates charged to policyholders. This is because Re/Insurers' balance sheets rely more on investment income and the asset side of the balance sheet in high-interest rate periods. The Re/Insurance term for this is cashflow underwriting and soft (bear) market conditions
• Whereas, to anticipate that lower interest rate environments will see higher premium…