ATLANTA -- Bermuda-based PartnerRe executive vice president Graham Dimmock has expressed scepticism over the capital markets' ability, or appetite, to tackle insurance risks through securitisation or index-based mechanisms.

Mr. Dimmock is quoted in BestWeek's property and casualty edition, released during the RIMS Conference in Atlanta. He was said to have made the comments during an international seminar of the London International Insurance and Reinsurance Market Association in Dublin, Ireland this month.

He noted that a given amount of traditional reinsurance capital "can support several times its worth in risk and return 20 percent to the providers of equity''.

He said the same amount provided through the capital markets would need to attract investors willing to accept lower returns.

And because of the cumbersome nature of capital market vehicles, he argued, meeting regulatory and rating agency requirements would require a level of disclosure that most insurers would find unacceptable in a competitive environment.

He believed a very large catastrophe could actually attract more capital to the conventional insurance market, as reinsurers wouldn't be willing to let such an event provide an opening for non-traditional competitors.

And an even larger event, he said, could frighten off capital market players if, as has been predicted, a $50-billion or larger catastrophe loss caused the insolvencies of a large numbers of insurers.

Mr. Dimmock also believed a number of the index-based products now available for hedging of insurance risks were "suspect'' at best.

He said that PartnerRe was seeking ways of bringing the capital markets and reinsurers closer together, while cautioning that any workable device was not likely to resemble anything currently on the market.

He agreed with others at the forum that there was great value in specialisation, with even large reinsurers, like PartnerRe, retaining areas of specialty.

"Without this ability to drill down to the detail of our clients' business and to thereby bring real value and partnership to the business relationships we develop, we risk seeing the total commoditisation of our business,'' he said.

Mr. Dimmock said the consolidation that had been occurring in the reinsurance industry had been healthy for the industry, providing greater security for clients.

But he suggested that PartnerRe might help to fill the void because the handful of very large reinsurers is probably not enough. PartnerRe has just decided to buy France's SAFR for $950 million.

BUSINESS BUC