Artemis Live - Insurance-linked securities (ILS), catastrophe bonds (cat bonds), reinsurance 28: Custodianship of capital and why it's so important for start-ups
Dec 6, 2020
25:56
At this time of year with the reinsurance renewals fast-approaching and new capital entering the market from private equity investor backed raises and start-up launches, as well as insurance-linked securities (ILS), being good custodians of capital is especially important (but often neglected).
In this podcast episode we touch on some of the reasons new capital can often find itself having to be the cheapest reinsurance capital in the market.
As a range of factors have driven the reinsurance market into its current firming (perhaps hardening) state, this has attracted large private equity investors, who are deploying significant sums into reinsurance start-ups led by well-known industry luminaries.
But, no matter how luminous, start-ups can face the age-old problem of being new to programs and so having to be cheap, or super-competitive, on price to get sufficient signings to deploy all their capacity into renewal business.
This year, a number of start-ups have added billions of dollars of new capital into the market, in a year when sector capital has not been particularly severely eroded.
These well-funded start-ups are banking on being able to build quality portfolios of reinsurance business, to deliver the returns their private equity backers demand.
At the same time, new ILS fund start-ups face the same issues, of having to be competitive and open to avenues to deploy capital they may not have envisaged.
All of which will have an effect on the renewals, but also underscores the need to be good custodians of investor capital.
In this podcast episode we touch on some of the reasons new capital can often find itself having to be the cheapest reinsurance capital in the market.
As a range of factors have driven the reinsurance market into its current firming (perhaps hardening) state, this has attracted large private equity investors, who are deploying significant sums into reinsurance start-ups led by well-known industry luminaries.
But, no matter how luminous, start-ups can face the age-old problem of being new to programs and so having to be cheap, or super-competitive, on price to get sufficient signings to deploy all their capacity into renewal business.
This year, a number of start-ups have added billions of dollars of new capital into the market, in a year when sector capital has not been particularly severely eroded.
These well-funded start-ups are banking on being able to build quality portfolios of reinsurance business, to deliver the returns their private equity backers demand.
At the same time, new ILS fund start-ups face the same issues, of having to be competitive and open to avenues to deploy capital they may not have envisaged.
All of which will have an effect on the renewals, but also underscores the need to be good custodians of investor capital.