LONDON (Reuters) - British regulators see no case to intervene to stop a wave of money moving into insurance-linked markets like catastrophe bonds, saying the development should not be overstated.
Billions of dollars from investment funds have flooded into the insurance sector, hunting for better yields, allowing insurers and re-insurers to spread risk and drive down prices.
One increasingly popular instrument is so-called catastrophe bonds which are sold by insurers to share risks they take on for covering natural disasters.
John Nelson, chairman of Lloyd's of London insurance market, said last month the trend helped to fund expansion but that if not properly supervised, it could undermine the sector's stability.
"It's important not to overstate these developments," Julian Adams, the sector's top regulator in Britain, told a gathering at Lloyds of London on Wednesday.
"Some of these alternative structures have been a feature of the market for almost twenty years, so it's hardly a completely new phenomenon," Adams, deputy chief executive of the Bank of England's Prudential Regulation Authority added.
Such changes may pose questions for some incumbent firms' existing business models but these on their own don't make a case for regulatory intervention, Adams said.
"In raising these questions we do not see that these issues are necessarily insurmountable barriers which create a case for regulatory intervention," Adams added.
(Reporting by Huw Jones, editing by Belinda Goldsmith)