The influx of investment capital into global insurance markets could be a ‘game changer’, say insurance executives.A panel of Bermuda-based CEOs at the Insurance Day Summit yesterday agreed that the “deluge” of capital from investors hoping to see sizeable returns is changing the dynamic of the industry.“There’s been a deluge of capital into our industry, even in the last two months,” said Jed Rhoads, president and chief underwriting officer at Alterra Bermuda, adding that collataleralised capital is coming in via several directions, not only catastrophe bonds and insurance-linked securities.“It’s coming in from capital managers in a meaningful way and I’m not certain looking forward that the capital is going to get driven out of our industry because of a big event or series of big events. It might be stickier than we think and that’s a game changer.”Hedge funds, private equity and pension funds are looking for investments with better returns and less volitality than the traditional capital markets.Steven Cohen, who built one of the world’s biggest and most successful hedge funds, set up SAC Re in Bermuda, which then bought a 5.2 percent stake in Validus Re at the end of last year.Mr Cohen is one of a handful of hedge fund billionaires entering the reinsurance market, following behind David Einhorn of Greenlight Capital and Daniel Loeb of Third Point.But they aren’t the only ones interested. In May, Florida Citizens Property Insurance sold $750 million in cat bonds for hurricane cover and Everglades Re Ltd, a Bermuda-based special purpose insurer, will be the underwriting vehicle.“This is capital that can’t find a home somewhere else in the financial community and is now looking for a home that is diversified,” said Mr Rhoads, who was part of the first Bermuda-based, hedge-fund backed reinsurer Stockton Re.But surplus capital can be too much of a good thing, said the panel. Traditionally, the inflow of investors following a catastrophe was in hopes of taking advantage of the hardening market — where reinsurers could charge higher premiums due to lack of available capacity. But since the huge 2011 Japan earthquake loss — the second most expensive catastrophe on record — rates haven’t hardened to expected levels.In fact, according to panellist Nicolas Papadopoulo, CEO of Arch, the industry has excess capacity keeping rates low.“One of the things that strikes me is that we had $100 billion in losses in the last two years and the capital is still plentiful — we have the same capital today that we had two years ago,” he said.Now, said Mr Papadopoulo, the capital invested in the industry is essentially “trapped”. With capital tied up with ongoing liabilities combined with a low interest rate environment, a lot of investors are “dying to get out”.“It’s like the song Hotel California — it’s easy to get in but hard to get out,” he joked.Ariel Re CEO Tom Hulst, another panellist, said that the new rush to invest in the insurance industry means that returns might not be what they once were.“The faster flow of capital in and out of the industry means it isn’t going to get as good as it used to, at least certainly in the property cat business, because the traditional hard market is going to get lopped off at the top with capital flowing in much faster than it used to,” he said.Kean Driscoll, new CEO of Validus Re said that if clients begin to change their buying habits due to the influx of capital and move away from the traditional treaty reinsurance product to alternative structures such as cat bonds, then expect changes within the industry.“If this is a dynamic we have to deal with, then I think what we’ll find is a lot of traditional rated reinsurance capital will leave the industry and reinsurance companies will start to manifest themselves into more asset managers, positioning themselves between buyers and capital providers to leverage their opportunities,” he said.