Artemis Live - Insurance-linked securities (ILS), catastrophe bonds (cat bonds), reinsurance

For this one of our sponsor showcase video interviews, for the upcoming Artemis ILS NYC 2022 conference (held April 22nd in New York City), we welcomed Lorenzo Volpi, Managing Partner at specialist ILS and reinsurance investment manager Leadenhall Capital Partners, one of our Gold sponsors for the conference. As ever, we’re looking at the development of the insurance-linked securities (ILS) market with one eye to the future, as is the way with Artemis’ ILS events. You can register for the event online here: https://www.artemis.bm/ils-nyc-2022/  Volpi provided an update on investor trends in the insurance-linked securities (ILS) space, explaining that after a series of catastrophe losses in 2021, investors have become increasingly curious and want to understand how ILS fund managers, like Leadenhall, are applying lessons learned.  In addition, investors are seeking to understand how ILS managers are positioning themselves to take advantage of opportunities in the current reinsurance market environment.  While other key investor trends are, as you might expect, climate change and climate risk, as well as environmental, social and governance (ESG) issues.  "Ultimately investors welcome client-servicing intimacy and an open and transparent dialogue, because the investment long-term benefits should be obvious to everyone and you don't want to surprise them, of course," Volpi said in the interview.

For this one of our sponsor showcase video interviews, for the upcoming Artemis ILS NYC 2022 conference (held April 22nd in New York City), we welcomed Thomas Nuth, the Vice President of Marketing at DeNexus, one of our Bronze sponsors for the conference.  DeNexus is a specialist provider of software for cyber risk quantification and its DeRISK Insurance product enables quantification of the cyber risk of industrial enterprise clients and client portfolios for underwriters, helping reinsurers and ILS investors gain visibility and understanding of cyber risks they may face.  Thomas explained the DeNexus approach to cyber and in particular what its DeRISK Insurance product offers to insurers, reinsurers and ILS investors looking to underwrite or allocate capital to cyber risks.  He also went on to provide detailed thoughts on some of the threat vectors the insurance, reinsurance and ultimately ILS investor markets may face, as well as how DeNexus is developing its tools to help risk markets make more sense of cyber exposure and threats.

For this one of our sponsor showcase video interviews, for the upcoming Artemis ILS NYC 2022 conference (held April 22nd in New York City), we welcomed Tom Johansmeyer, Head of PCS, part of the Verisk group of companies, and our Headline sponsor for the event.  As ever, we’re looking at the development of the insurance-linked securities (ILS) market with one eye to the future, as is the way with Artemis’ ILS events.  To that end, Tom had some particularly interesting and highly relevant views to share on political violence and also cyber terrorism, two areas of the insurance and reinsurance market that are not yet staple perils for insurance-linked securities (ILS) investors, but that Tom believes could become so in time.  In particular, Tom believes that recent trends are driving increasing risks of political violence, unrest and also cyber attacks, making the development of additional risk capital sources and new risk transfer products to address these exposures increasingly important.

In this episode of the Artemis.bm podcast we review the record year of catastrophe bond issuance that was seen in 2021 and comment on the twenty-five year anniversary of a landmark transaction from late 1996. We also discuss the important role insurance-linked securities (ILS) play as a form of reinsurance capital structure, with the cat bond increasingly a key source of reinsurance, retrocession and importantly insurance capacity for a growing base of sponsors. We also summarise the changes we've made to help you track catastrophe bond and ILS market activity more accurately, explaining decisions taken to enhance our charts and data service for you. Finally, we look ahead to 2022 and discuss some of the potential catalysts that could turn this year into another record-setting one for the catastrophe bond market.

For our latest Artemis Live interview we wanted to understand how the industry loss from Hurricane Ida has been developing and explore the complexities in the reconstruction and recovery that could impact just how high the insurance and reinsurance market loss could rise.  Who better to do that with than executives from Property Claim Services (PCS), a division of Verisk, so we were joined by Tom Johansmeyer, Head of PCS and Ted Gregory, Director of Operations, PCS and ISO Claims Analytics for this video interview.  Estimates for the industry loss from Hurricane Ida still range from as low as $25 billion to as high as $40 billion, sometimes above, so it's clear at this stage there is no consensus.  In order for the market to really understand what’s going on, it’s important to look at the facts on the ground and the claims data flowing through the market from underwriting companies.  Hence, our discussion with PCS in this interview hopes to provide some more detail as to what's being seen on the ground in Louisiana, as well as further afield and how that will potentially influence the continued development of losses from Hurricane Ida.  Listen to this episode to learn more about the on-the-ground situation in Louisiana after Hurricane Ida, as well as to better understand some of the complexities that may drive loss creep and claims amplification.

Our latest Artemis Live video interview saw us exploring the importance of climate risk models in the management of portfolios of reinsurance and insurance-linked securities (ILS), with senior executives from Aeolus Capital Management.  Aeolus' Head of Research, Dr. Pete Dailey, and Partner, and Chief Analytics Officer Frank Fischer, joined us to discuss the importance of climate models in their work and how these tools are improving.  We also explored how Aeolus is leveraging climate modelling, data, and analytics, to inform its portfolio construction and management, asking Dailey and Fischer how they see the use of climate inputs to ILS decision-making evolving.  Taking into account climate change related factors in how reinsurance-related risks are modelled, assessed and selected for portfolios, is deeply integrated into the processes followed by Aeolus.  It's also critical to explain how climate is factored into decision-making, when it comes to having conversations with ILS investors, Dailey and Fischer explained.

Recently we hosted a live webcast in association with Genpact, on the use of technology within the reinsurance space and the importance of data. The insightful discussion explored the industry’s current use of technology and ability to adopt new processes, with a view to what this might mean for the future of the reinsurance market as it looks to progress and innovate. Our panellists for the webcast were from Genpact, Swiss Re, Google and Tremor Technologies and they all agreed that the reinsurance industry's data and tech maturity is increasing, but that there is a lot more to be done. “If I was to think about where the industry is and how it has leveraged the opportunities, I think it’s a little bit of a mixed bag, in my view,” said Sameer Dewan, Global Business and Digital Transformation Leader, Insurance, Genpact. One of the positives, according to Dewan, is that the reinsurance industry in particular has made great strides with its catastrophe risk modelling by leveraging new data sets extensively, and evolving its understanding of natural hazards. Dewan also noted that solid progress is being made around how the market manages its data and governance, although warned that there’s still a long way to go here. “What I mean by that, is it’s not just data within the organization that they have across multiple systems, both manual and some more automated processes, but also how data is managed in the ecosystem and how the data transfer plays out. I think that’s a huge opportunity,” he said. The second piece, he continued, is the under investment in reinsurance core technology. “There are technologies in play, but I don’t think they necessarily meet the needs of the complexities that we have to deal with today. A lot of the work is still performed manually. Having said that, I think we are at a tipping point,” said Dewan.

For our latest interview, we were joined by Tom Johansmeyer, Head of PCS to discuss the issue of cyber risk and ask the question, why isn't it a bigger exposure in the insurance-linked securities (ILS) market?  For almost a decade, the subject of cyber insurance-linked securities (ILS), cyber catastrophe bonds and the ILS fund market as provider of cyber reinsurance, has been a topic of conversation at industry events around the world, our own included.  But years later, the ILS market's ventures in cyber risk remain relatively limited, to some bespoke transactions and exposure picked up silently from other lines of business. Why is that?  Tom Johansmeyer and I explored some of the reasons behind this. Asking questions such as does the ILS market even want cyber risk? Is a lack of data, risk models and industry loss events still a limiting factor? How big an issue are ransomware losses right now? What could catalyse the need for more risk capital? And, why is cyber reinsurance and retro so dysfunctional right now.

We recently hosted a webcast in partnership with Vesttoo, where the discussion focused on innovative approaches to insurance and reinsurance linked investments.  Our expert panellists discussed opportunities for investors to access high frequency, low severity insurance asset classes.  Viewers heard how the market for insurance and reinsurance linked investments continues to develop, with new routes becoming available to help investors access what is an expanding asset class.  Also discussed, were thoughts around how innovative approaches, such as pooling or asset-based collateralization, can enable asset managers to buy into these risks, earning spread from the uncorrelated risk of non-catastrophe insurance and reinsurance premiums on top of current yields.  Our panel guests included: Yaniv Bertele, Chief Executive Officer (CEO) of Vesttoo; Mattias Eng, Head of Insurance Solutions, Securis Investment Partners LLP; Hedwige Nuyens, Managing Director, International Banking Federation; and Sam Gaynor, Co-Head Financial Services Practice, Altamont Capital Partners.  Our industry experts agreed that the low volatility and projectable cash flows offered by high frequency, low severity perils in areas such as casualty insurance or reinsurance, are increasingly gaining attention from more experienced investors looking for relatively uncorrelated returns and higher yields.

We were recently joined by Christian Mumenthaler, Chief Executive Officer of one of the world's largest reinsurance company's Swiss Re, who discussed the state of the market, his outlook, the insurance-linked securities (ILS) market and what his priorities are for 2022 in this interview.  On reinsurance market pricing, Mumenthaler told us, "I’m really pleased that the industry overall has taken the right steps and we’re back into an acceptable area." But he warned of the need for rate adequacy to persist across reinsurance, saying that climate risks suggest further rate increases will be necessary.  Mumenthaler also explained how Swiss Re's alternative capital and insurance-linked securities (ILS) business is developing, highlighting the importance of this to the company.  He said that he expects more opportunities to deploy alternative capital overtime, with the capital markets an important partner for the reinsurance company he leads.  The Swiss Re CEO is bullish on opportunities for the capital markets to assist in narrowing natural catastrophe protection gaps and also to provide risk capital to support challenging areas of insurance coverage, such as event cancellation.