The insurance industry will have to look at the risk involved in the aviation war sector, an expert warned.

Michael Millette, partner and managing director at US-based banking giant Goldman Sachs, said hundreds of millions of dollars in losses after fighting at Tripoli airport in the civil war and a bombing at Pakistan’s Karachi airport should send a signal to the industry.

Mr Millette added that the aviation war sector was currently looking at pricing.

He said: “We will have to see how pricing comes out. The sector is being repriced now and we’ll have wait and see what the results are.”

Mr Millette explained that the developing world had invested heavily in modern passenger aircraft in recent years.

He said: “Conditions have certainly changed. I think aviation is much more spread across the developing world and the developed world than it used to be.

“In Tripoli, we would not have had such a large loss there ten years ago because it would be unlikely that there would have been such an expensive fleet of jets there at one time.

“It’s not just an issue of recovering a loss — the risk itself is evolving.”

Mr Millette was speaking after he moderated a panel discussion on opportunities for investment in reinsurance funds compared to other asset classes at the Convergence 2014 event in Hamilton yesterday.

Leon Beukes, a senior investment manager with professional services company Towers Watson predicted that there would be little change in the insurance-linked securities business over the next year.

Mr Millette said: “Pricing has moved quite a bit and we expect in this sort of environment we will see some new money entering and some leaving, but we are seeing very little in funds leaving this space.

“The sentiments we have heard from the panel are that investors are working to find ways to put money to work in this market where so many sectors are at high levels and they appreciate the value in this sector.”

Mr Millette added that there “will certainly be a change” if a major event were to happen.

“People believe that even if other sectors change, even if rates go up sharply, even if there is deflation, this sector is going to be fairly consistent because it’s being used by so many investors as a diversifier,” he added.

“Events in other markets are not likely to get them to move out quickly.”

Panel member Jonathan Malawer, managing director of KZ Advisory, told the audience at the Convergence 2014 conference: “It still makes sense to have investors have a foothold in this asset class and to be patient.”

Jay Cohen, managing director of Bank of America’s Merrill Lynch, added that “the avenue for new money to come into the market is very well-paved”.

John Brynjolffson, founder and chief investment officer at Armored Wolf, said: “I would counsel my clients to be comfortable with slightly less returns in an environment that offers less returns, or if you want to be strategic ... funds that specialise in finding opportunities on the short side.”

He said investors should “not be fooled” by changes in pricing in the reinsurance market because small changes did not affect the underlying risk, which was measured by “actual disasters.”

Mr Brynjolffson added: “There are ways to generate returns but it’s not through just sitting on wealth and putting it to work in the stock market.”