Alternative and third-party capital is being used outside the traditional area of catastrophe bonds, experts have said.

And the reinsurance industry is increasingly seeing alternative cash as a complementary type of additional capacity.

PwC Bermuda managing director David Gibbons said: “There continues to be significant growth in the ILS market reflecting the abundance of capital still available and the attractiveness of this market as a means of diversification.

“We are seeing a shift away from the growth being in the more traditional catastrophe bond space and catastrophe covers to more complex structures and more diverse property and casualty lines.

“However, cat bonds are still an important and active piece of the ILS market.”

Mr Gibbons added that there continued to be “significant interest” in the life sector — and that the variety of products offered had “very different liquidity and return dynamics” and were attractive to a growing segment of the market.

He was speaking during last week’s annual Bermuda Reinsurance Conference, sponsored by PwC Bermuda and ratings service Standard & Poor’s.

Co-founder and managing principal of Fermat Capital Management, John Seo, said he saw alternative capital as complementary to traditional reinsurers — particularly in closing the insurance gap.

“I definitely see it as a complement and the protection gap is really the biggest place I believe alternative will play,” he said.

“The protection gap by definition is actually systemic risk — these are risks that are so big from single events that can’t all possibly be covered.

“So I do think it’s a complement, and in particular how I think it’s going to break out is you are going to see more alternative capital providing coverage on an index or parametric basis.”

Mr Seo added that bigger losses are incurred through business interruption and less on the physical damage side.

Craig Wenzel, a senior vice-president with XL Group, said: “I think there are plenty of things the alternative capital market can do that traditional reinsurers and insurers are sometimes loath to do — those channels aren’t set up properly to do that — but they are also looking at us to provide leadership in underwriting and understanding risk and packaging it in the most appropriate way.”

AlphaCat Managers’ CEO Lixin Zeng, believes traditional capital and alternative capital will find equilibrium in the long-term.