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

For this interview, with Cory Anger, Managing Director and Liam Martens, Vice President, both from GC Securities, the capital markets division of reinsurance broker Guy Carpenter, we discussed the next generation of catastrophe bonds. The pair joined us as part of our virtual ILS NYC 2021 conference, to discuss where catastrophe bonds could gain broader market acceptance and uptake.  As well as how insurance-linked securities (ILS) in general can play an increasingly important role in risk transfer and reinsurance markets.  We discussed how the insurance-linked securities (ILS) market can assume a larger role in insurer and reinsurer capital stacks and what that would mean for insurance and reinsurance cedents. Catastrophe bonds can become a more permanent piece of the insurance and reinsurance market's capital arrangements, the pair believe. Which would see insurance-linked securities (ILS) becoming a form of permanent capital, that can be relied upon for evolving and growing insurance or reinsurance businesses.

This group discussion was held during our ILS NYC 2021 conference, to explore the expansion of the insurance-linked securities (ILS) asset class to cover a broader range of perils. We welcomed: Yaniv Bertele, Co-Founder & CEO of Vesttoo Ltd.; Thibaut Adam, Managing Director, Citi; Kenny Durbin, Senior Vice President, Guy Carpenter; and Matt Beard, Managing Director, Guy Carpenter.  The panel joined us to explore areas of potential insurance-linked securities (ILS) market expansion as part of our ILS NYC 2021 virtual conference.  We talked about the opportunities for capital market investors in areas of risk outside of the more typical property catastrophe exposures that are commonplace in ILS markets.  We also explored the potential for technology such as artificial intelligence to enable and facilitate the transfer of longer-tailed risks to the capital markets, as well as where the ILS market is going in terms of non-CAT risk investments.  Specific segments explored included casualty lines of business, specialty risks, as well as life and health related exposures.  The investor appetite for a broader range of reinsurance perils in insurance-linked securities (ILS) format was also discussed.

Michael Millette, Founder and Managing Partner of Hudson Structured Capital Management joined us for this interview as part of our ILS NYC 2021 virtual insurance-linked securities conference. The discussion focused on Michael's views on the forward-looking development of the insurance, reinsurance and insurance-linked securities (ILS) market, as well as how capital use may change across insurance and reinsurance.  The wide-ranging discussion also covered the special purpose acquisition company (SPAC), digital technology and insurtech, as well as where surprises and opportunities may come from that may benefit insurance-linked securities investors and investors across the rest of the insurance and reinsurance spectrum.  In particular we focused on topics relevant to the fact Millette believes the insurance and reinsurance sector will change more over the next decade than it has in the last 70 years.

Michael Stahel, Partner and Portfolio Manager, LGT ILS Partners, joined us to explore insurance-linked securities allocation strategies, as part of our ILS NYC 2021 virtual conference. For this interview we discussed what a next-generation insurance-linked securities (ILS) allocation strategy could look like.  Michael explained how this has been approached at LGT ILS Partners in their collateralised reinsurance underwriting and ILS investment, as well as his view on how future strategies may evolve.  We also spoke about new strategies that could bring greater efficiency to both investor and ILS fund manager capital as well.  While still remaining true to the original premise of insurance-linked securities and collateralized reinsurance, delivering efficient capacity to support risk transfer transactions.

Barney Schauble, Head of Labs at Nephila Advisors, part of insurance-linked securities (ILS) manager Nephila Capital, joined us for a fascinating discussion as part of our ILS NYC 2021 virtual conference.  The discussion focused on the opportunity side of the environmental, social and governance (or ESG) question for the insurance-linked securities (ILS) market.  Schauble discussed the importance of climate and impact related risk transfer and how this could play into the ILS market over time.  Importantly touching on what this could mean for the insurance-linked securities (ILS) investment community going forwards, as well as for the use of ILS structures to support climate related risks, and impact focused insurance or reinsurance risk transfer.

We were delighted to be given some insight into global reinsurance giant Swiss Re's plans for future insurance-linked securities (ILS) activities by Judy Klugman, Global Co-Head of ILS, and Ed Johnson, Head of ILS Sales EMEA & APAC, both from Swiss Re Capital Markets.  The pair joined us as part of our virtual ILS NYC 2021 conference, to discuss the role of the reinsurer in delivering next generation ILS investment opportunities. Judy and Ed explained where the next generation of ILS investment opportunities with Swiss Re as a partner will likely come from.  As well as what the role of a global reinsurance player like Swiss Re is in delivering future ILS investment opportunities and structures.  We also touched on how Swiss Re’s strategy of bringing ILS capacity into its own capital structure more directly is going to continue to evolve.  While lines of insurance and reinsurance business that may be deemed suitable to partner with capital market investors were also a topic of conversation.  Judy and Ed also gave us their thoughts on the future role of the catastrophe bond as a staple of ILS and reinsurance risk management.

Niklaus Hilti, Head of insurance-linked securities (ILS) at investment manager Credit Suisse's Insurance Linked Strategies division joined us as part of our ILS NYC 2021 virtual conference.  Niklaus discussed his forward-looking, perhaps blue-sky view of what the insurance-linked securities (ILS) market could become over the next decade.  Catastrophe bonds, collateralized reinsurance and other established ILS instruments such as sidecars and ILW's were discussed.  Niklaus also explained how structures could change in the ILS market in future, what investor appetite may look like, as well as future origination processes to secure access to insurance and reinsurance risks.

Tom Johansmeyer, Head of PCS, a Verisk business, joined us during our ILS NYC 2021 virtual conference to discuss the important role of the industry-loss trigger in insurance-linked securities (ILS) and catastrophe bonds.  He shared his thoughts on how use of the industry-loss trigger structure may evolve over the next few years in catastrophe bonds, ILS and reinsurance.  He also provided some outlook on cat bond market activity and ILS for the coming year, as well as how such structures can become increasingly important to those seeking reinsurance or retrocessional protection.  Tom also shared some thoughts on basis risk in reinsurance more generally with us, discussing how cedents generally consider this.

This was the fifth session of Prospectus 2021, a new annual reinsurance and insurance-linked securities (ILS) conference brought to you by Artemis in collaboration with sister title Reinsurance News in November 2020. Focusing on the capital and investments side of both reinsurance and insurance-linked securities (ILS), the expert panellists discussed the impacts of the COVID-19 pandemic on the sector's capital raising abilities. They highlighted the new wave of capital going to both established entities, as well as to new startups across reinsurance. Greg Hagood, Co-Founder of Nephila Capital explained, "For the existing companies it’s interesting because obviously liquidity is abundant, capital’s flowing and there’s easy to access capital right now in the world. So, it seems to me that part of that capital raise is likely defensive; shoring up past reserves, shoring up the balance sheet; a lot of uncertainty around COVID. "So, part of that raise was probably defensive, and part of it is likely offensive." Also participating in the panel discussion were: Stephan Ruoff, Head of Schroder Secquaero; Henning Ludolphs, Managing Director, Retrocession & Capital Markets, Hannover Re; and John Butler, Managing Director, Cohen & Company. Butler of Cohen & Company highlighted that investors have been very supportive of insurance, reinsurance and ILS companies through the pandemic. While at the same time the opportunity to invest in re/insurance has become very attractive right now. "We see very attractive opportunities for investment moving forward, and I think our investors now feel that there is sufficient clarity to understand how this has been affected by the current situation and what the changes will be moving forward," Butler said. Ruoff of Schroder Secquaero explained that he sees capital flowing to more predictable insurance-linked securities (ILS) structures. "I think it comes down to what you call the alignment of interest, and the alignment of interest with the manager that’s the fiduciary of the money, or with the management team, or the capital providers and the management team when it comes to building new structures," Ruoff noted.

This was the fourth session of Prospectus 2021, a new annual reinsurance and insurance-linked securities (ILS) conference brought to you by Artemis in collaboration with sister title Reinsurance News in November 2020.  The session focused on terms and conditions (T&Cs) and explored both the loosening during the soft market period, and the expectation of continued tightening as the market enters 2021.  Strengthening terms of insurance and reinsurance, both to improve the clarity of coverage and precision of payouts when loss events occur, is seen as a key way to enhance the product and also the underwriting returns of companies in the sector.  During the panel, it was highlighted that in the ILS space there’s already been a focus on quota share terms, there’s been a toughening up on aggregates, and also a shift away from cascading coverages as market players look to secure more favourable T&Cs.  But while progress has clearly been made, is this enough or is there a lot more to do at the renewals?  The panel featured Heather Kitson, Deputy Chief Executive Officer (CEO) of Convex Re, Michael Millette, Founder & Managing Partner, Hudson Structured Capital Management and James Parker, Chief Claims Officer at AXIS Re.  The discussion covered the continuing shift to named peril coverage and how certain areas of the market were already ahead on this, such as catastrophe bonds.  It also covered the need for alignment between parties and how this can overcome terms confusion.  Both cyber risks and so-called intangible risks were also discussed, with the panel concluding that the industry needs to work on terms to contain these and other areas of insurance and reinsurance where difficult to predict losses may lie.