Artemis Live - Insurance-linked securities (ILS), catastrophe bonds (cat bonds), reinsurance 131: Opportunity cost of trapped ILS collateral in focus: Megan Green, PWC Bermuda
Aug 16, 2023
11:03
The insurance-linked securities (ILS) fund manager community continues to deal with trapped collateral from previous catastrophe years, but the opportunity cost has grown, we learned in our latest Artemis Live video interview.
Our latest Artemis Live video interview is with Megan Green, a Partner in the PwC Bermuda Asset Management Assurance Group.
Green's work is focused on providing assurance services to clients in the asset management industry including insurance linked securities providers and she joined us to discuss insurance-linked securities (ILS) asset management activity in Bermuda today.
Green highlighted trapped collateral as a continuing issue for ILS fund managers and one that now comes with an increasing opportunity cost.
She explained that alongside investor appetite and capital raising, trapped collateral remains the other hot-topic for ILS managers.
"That's been an issue for a few years now, but we are seeing collateral get released, which is great," Green said.
But continued, "I think in this market, with rates being as strong as they are, it almost shows that the opportunity cost of that trapped collateral is greater. "So it's probably getting an even greater focus, because obviously investors and ILS managers would love that to be deployed."
While trapped, this collateral and capital cannot be recycled to be put to work in fresh reinsurance arrangements, which in the hard market environment would come with significantly higher-yields than the arrangements that now see collateral still trapped.
Green went on to say that, "It'll be interesting to see what happens in that space. You know, you obviously have your commutations that are going on. But, there's chatter about whether standard commutation clauses are put in contracts, if that solves the problem. So I'll be interested to see what happens."
Listen to the full podcast episode for more insights from PwC Bermuda's Megan Green.
Our latest Artemis Live video interview is with Megan Green, a Partner in the PwC Bermuda Asset Management Assurance Group.
Green's work is focused on providing assurance services to clients in the asset management industry including insurance linked securities providers and she joined us to discuss insurance-linked securities (ILS) asset management activity in Bermuda today.
Green highlighted trapped collateral as a continuing issue for ILS fund managers and one that now comes with an increasing opportunity cost.
She explained that alongside investor appetite and capital raising, trapped collateral remains the other hot-topic for ILS managers.
"That's been an issue for a few years now, but we are seeing collateral get released, which is great," Green said.
But continued, "I think in this market, with rates being as strong as they are, it almost shows that the opportunity cost of that trapped collateral is greater. "So it's probably getting an even greater focus, because obviously investors and ILS managers would love that to be deployed."
While trapped, this collateral and capital cannot be recycled to be put to work in fresh reinsurance arrangements, which in the hard market environment would come with significantly higher-yields than the arrangements that now see collateral still trapped.
Green went on to say that, "It'll be interesting to see what happens in that space. You know, you obviously have your commutations that are going on. But, there's chatter about whether standard commutation clauses are put in contracts, if that solves the problem. So I'll be interested to see what happens."
Listen to the full podcast episode for more insights from PwC Bermuda's Megan Green.