Insurance and capital markets: convergence or collision course?
Icap’s launch of an insurance derivatives and securities broking joint venture will promote liquidity and transparency in this fast-growing niche. If new sources of capital prove resilient to soft markets, insurers may see them as a new strategic challenge.
"We are considering longevity derivatives and branching out into other insurance asset classes"
WHEN THE WORLD’S largest interdealer broker plunges into a new financial market, it’s a reasonable bet that it is one set for substantial growth. In February 2007, Icap, which boasts a daily transaction volume of more than $1.5 trillion in interest rate, credit, energy, foreign exchange and equity derivatives markets, established a joint venture with insurance broker Jardine Lloyd Thompson to operate in the markets where insurance, financial derivatives and securities are converging. Setting up operations took time and it wasn’t until late last year that it completed its first deal, an over-the-counter catastrophe swap on North American windstorm risk of undisclosed size between two unnamed counterparties. Since then, business has been brisk, Michael Spencer, chief executive of Icap, tells Euromoney.