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In this slew of data, information about insurance and reinsurance prices is conspicuously absent. The industry has always argued that insurance is not a commodity. Policies are not identical, so prices would not be comparable, it is said. Nevertheless, for many classes of cover, especially in personal lines, wordings are very similar and indicative pricing for selected benchmark policyholders would be reasonable.

When it comes to reinsurance, the lack of clear pricing information allows the market to include in a favourite pastime - accusing others of cutting rates below cost while maintaining that they themselves are making reasoned discounts. Regulators and investors would like to know which underwriters are storing up trouble by consistent under pricing while there is still time to take action, while reinsurers themselves are universal in calling for more risk information in as standardised a format as possible for their own underwriting.

Information black holes permeate the industry. In terms of catastrophe risks large enough to cause real economic damage, we do not even know how much reinsurance is really available to meet the losses. The most knowledgeable estimates put it at around $60-80 billion. Yet, just one of the largest events, a category 5 Florida hurricane, a major storm travelling up the US eastern seaboard or California earthquake, could soak up much of this capacity. Stress signs start to appear with industry losses below this level, around $40-50 billion, as Hurricane Katrina showed in 2005.

Today, so the argument goes, that will not be a problem, because new capital will dash into the market to take advantage of rates that will inevitably soar after a major loss. It will be difficult for a year or so with shortages in capacity and high prices, but soon the new capital will create competition on prices and conditions.

Such regular distortions in the supply and pricing of what is still regarded as an essential commodity would in markets with real transparency create opportunities for smart investors. The only real route to investing in insurable risk so far has been through insurance and reinsurance companies with their large overheads and opaque pricing which has historically created bouts of volatility.

Change coming

Pressure is growing for change. There is money looking for enhanced returns and sophisticated investment funds see insurable risk, especially catastrophe risk, as a potentially useful asset class. The first eight months of 2006 has brought record levels of catastrophe risk securitisation in response to capacity shortages and high prices for property risks following the 2005 US hurricanes. By the end of the year, it is expected, cat bonds will have added at least another $3 million in capacity into the market, much of it for US windstorm.

These deals are structured in a standardised way: interest payable for a specified period at a specified premium to LIBOR for a maximum pre-set payment. Typically, they do not work on an indemnity basis but use some external trigger, such as reference to an industry loss index or a physical parameter like windspeed. Extensive modelling goes into such external triggers, so the issuer can eliminate the basis risk as much as possible and the probability of default is clear to the investor, usually via a rating agency.

Non-life insurance in the developed world is a mature market with sluggish growth in business. Yet, there are new territories and new risks that could provide real growth.

Earlier this year, a study group created by the influential Group of 30, an international think tank of leading financiers and academics, published a lengthy report, Reinsurance and International Financial Markets. The study group argued that securitisation offers many benefits to the insurance industry, such as reducing counterparty credit risk and creating more capacity.

However, the report quickly goes on to say, "Efforts by the industry to expand securitisation, allowing new and existing risks to be managed through the capital market, are unlikely to succeed unless the industry becomes more transparent."

According to the Bond Market Association Research Quarterly, the total issuance of US asset backed securities in the first half of 2006 was $471.7 billion. If insurable risk can be successfully detached from the cumbersome corporate costs of indemnity, the potential pool of investors is wide. Greater variety in contracts and an increase in transparency could create real growth in non-life insurance and reinsurance.