# Insurance Risk as an Alternative Asset Class

**Published by:** [jelca thinks](https://paragraph.com/@jess/)
**Published on:** 2022-06-03
**Categories:** insurtech
**URL:** https://paragraph.com/@jess/insurance-risk-asset-class

## Content

Status quopolicy holders buy from retail brokersretail brokers buy from 1) carriers 2) MGAs 3) wholesalersonly carriers underwriteMGAs do not underwrite and need a reinsurer for the 1) balance sheet 2) license. They pitch they can better underwriteUsually they can get from reinsurance firms like SwissRe or MunichRe. But there are only a handful in the entire world and capacity is severely constrained and backloggedFronting carriers then existed to also provide this license and balance sheetthey still direct risk to the reinsurerseffectively they cushion between all the MGAs and the reinsurance firmsFronting carriers can be constrained too because they are ultimately still dependent on reinsurance firmsProblem: reinsurance capacity is constrained.Demand: investors are increasingly interested in alternative asset classes and diversifying their investmentsILS funds also moving away from nat cat given how poorly data there has beenEveryone else doesn't understand insurance risk but wants to get a piece of it if the returns are good.Solution: democratize and sell this risk to investors!helps MGAs get risk placedfronting carriers + reinsurance firms offload their capacityprovide a certain return to ILS fundsQuestions and riskstakes time to see if promised returns materializedability for the firm running this marketplace of risk to actually understand what is good risk and bad riskability to get ILS funds involved and investorsin an economic downturn, investors move away from new alternative asset classes and stick with more traditional methods

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