Navigating the future of insurance and reinsurance

The days of scale for the purposes of scale alone are going the way of the dinosaur.  Super large or "too big to fail" insurance (& reinsurance) companies will be like big whales waiting to be harpooned by shareholders or activist investors.  These companies will have all this excess capital and under performing results investors will demand it returned.

See one Too big to fail example and what happens.

The tools of today's day and age will require nimbler and more analytic players.  If you are keeping scale or the purpose of scale alone you are probably a shark that can't keep up with the others and will be devoured.  There are some powerful tools and data that we have failed to collectively analyze and ask for historically - and the pressure will increase unless the game is stepped up.  

As we know, adverse selection is a real issue and if your risk selection is flawed because your team doesn't have the right tools....prediction...there will be blood in the waters..

The future insurers and reinsurers will be expected to achieve positive returns on their capital, not be large floating bond funds with no generation of alpha.  Matching the appropriate risk duration with investors appetite will continue to be an evolving business model on the carrier side.   We are seeing examples of this at Arch, ACE/Chubb, etc.  

Generating Underwriting returns has been and will be the future of the industry, but the competition is getting tougher with the recent entrance of new "total return" players. These hedge fund based players are based upon minimal underwriting returns and maximizing the investment returns or float.

We will see what results these teams have, as if they cant generate strong consistent investment returns, it doesn't sounds like a good long term play.  However, please evaluate each on the basis of both investment and underwriting returns  (expected vs. actual).