As detailed in Part 1, “The Market in the Developed Economies” the reinsurance industry faces the task of partially reinventing itself to expand in those sectors where it can achieve growth. Property catastrophe coverage isn’t off the table but it’s now an overcrowded field. Ever more complete and sophisticated models have made calculating risk exposures more accurate. As James Vickers, chairman of Willis Re International, said, underwriters in the ’90s “simply didn’t have sufficient analysis” to accurately gauge the risks.

Now they do. Underwriting is frequently described as “half science, half art.” When the science becomes dominant, there’s less need for the art, and this seems to be the case in the U.S. and European property cat reinsurance markets. More reliable cat models, along with low interest rates, have attracted alternative capital from hedge funds, private equity firms, pension funds and other money managers. They back collateralized reinsurance, cat bonds and sidecars. In the near term, they’re in the market to stay.