Stephen Catlin says reinsurance bosses should not be so worried about what the future holds for their changing industry.

The founder and chief executive officer of Bermuda-based Catlin Group told conference delegates in Hamilton yesterday that fears over the impact on traditional reinsurers from the rapid influx of third-party capital had been overplayed.

Reinsurance pricing has tumbled in recent years as competition for reinsurers grows from insurance-linked securities such as catastrophe bonds. At the same time, reinsurers have seen investment income squeezed by low interest rates.

“I believe that some of the fear that has been propagated is unfounded,” Mr Catlin said in a speech to open the Bermuda Reinsurance 2014 conference at Pier Six, hosted by PwC and Standard & Poor’s Rating Services.

While rates were falling off in most areas, he said it was not as bad as the soft market of the late 1990s.

“I saw one broker quoted as saying it’s the worst market in a generation — he must be four years old,” Mr Catlin quipped.

He said he’d heard “extreme talk” among reinsurance executives of structural change in the industry and how it would “never be the same again”.

The alternative capital was going into “commodity products” distinct from the traditional reinsurance product, in which relationships played an important role, he said. The commodity approach to reinsurance has its problems, as Mr Catlin pointed out.

“There are six policies out there where the trigger is in dispute,” he said.

Mr Catlin said cyber risk and pandemic were two of the biggest threats he saw for the industry to contend with.

“A terrorist attack on the internet would mean the entire world could be hit with the same loss at the same time,” Mr Catlin said. “It may never happen, but we know there are criminals and terrorists out there trying to cause damage.”

While he saw cyber risk as threat, he said it also presented an opportunity.

“The challenge is to give coverage to our clients, provided we can cope with the systemic nature of that risk,” Mr Catlin said.

The solution would lie in providing coverage to individual businesses, while recognising that the reinsurer could not cope with a global disaster.

Another opportunity lay in improving process, Mr Catlin said.

“This industry is Luddite in terms of process and has not moved forward much in the 40 years I’ve been in the business,” he said.

Those companies who addressed process to make it more efficient and effective could gain competitive advantage.

He closed with two fundamental points. “We are very fortunate in that what we do has social value. We should be proud of that and we should talk about that.

“Secondly. relationship counts. It’s the foundation of our industry.”