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

This was another session from Prospectus 2021, the new annual reinsurance and insurance-linked securities (ILS) conference brought to you by Artemis in collaboration with sister title Reinsurance News in November 2020. This panel discussion saw us joined by some real experts in their fields of catastrophe risk and meteorological perils, to discuss the issue of secondary perils and climate change related risks. Participating were Kelly Hereid, Director, Catastrophe R&D, Liberty Mutual Insurance; Steve Bowen, Director & Meteorologist, Head of Catastrophe Insight, Aon; and Andreas Weigel, Weather Perils Lead, Swiss Re. Our expert speakers discussed the increasing impacts to insurers, reinsurers and ILS capital from so-called secondary perils, explaining some of the science behind this, what trends are being seen, if or how climate risk plays a role and what this means for underwriting strategies going forwards. The discussion covered the increasing contributor to catastrophe losses for the insurance, reinsurance and insurance-linked securities (ILS) industry that secondary perils have become, as well as the potential climate links to this rising cost burden.

Chamath Palihapitiya and David Soloff, founders of new startup OTT Risk, joined us to discuss their ambitions of unlocking private capital to support the non-damage business interruption insurance market.  With the theme of our ILS NYC 2021 event being "defining the next-generation" of insurance-linked securities (ILS), the recent launch of a new tech start-up focused on the insurance sector named OTT Risk closely aligned with our thinking on the future of this marketplace.  OTT Risk wants to tackle the massive societal issue around availability of insurance capacity for non-damage business interruption, something that has come to a head with the pandemic in the last year.  OTT Risk aims to enhance the economic resilience of the world’s businesses, by filling business interruption coverage gaps using advanced technology such as machine learning and by leveraging insurance-linked securities (ILS) structures to connect this emerging risk class with capital market investors.  So we were delighted to welcome founders David Soloff and Chamath Palihapitiya (of Social Capital fame) to learn more about their company and its mission.

For this broadcast, three specialist reinsurance and insurance-linked securities (ILS) focused Partners from global law firm Mayer Brown joined us as part of our virtual ILS NYC 2021 conference.  Steve Rooney, Ricky Spitzer and Colin Scagell, all of who work on numerous insurance-linked securities (ILS) and collateralised reinsurance transactions and structures, shared their thoughts on the future of the ILS market with us.  We discussed the important role of legal structuring within the ILS market, as well as how that may evolve over the coming years and how structures can promote innovation in the marketplace.  The group also explained where they see the potential for future ILS market expansion and growth, as well as the importance of ensuring both cedents and investors are well-protected by robust structures and legal documentation.

Rowan Douglas, Head of the Climate and Resilience Hub at Willis Towers Watson joined us as part of our ILS NYC 2021 virtual conference, providing an update on his important work at the intersection of climate science, capital, policy and risk. Rowan explained the importance of access to deep capital in financing for protection against climate risk and increasing climate resilience.  Having spoken at our first ever ILS NYC conference five years ago, Rowan highlighted the need for industry engagement on climate matters.  He gave us his updated thoughts on the important role of the capital markets in financing support for the closure of climate protection gaps.  Alongside insurance and reinsurance, Rowan sees an important place that the insurance-linked securities (ILS) market can participate in helping the world become more resilient to climate risks. The conversation also discussed the important topic of credit and how embedding climate into broader global financial credit decisions could be a tipping point for the need for climate risk transfer capital.

Tom Johansmeyer, Head of PCS, a Verisk business, joined us for a second interview during our ILS NYC 2021 virtual conference, this time to discuss the effects of the ongoing COVID-19 coronavirus pandemic on the reinsurance and insurance-linked securities market.  The discussion focused on the ongoing COVID-19 pandemic and what its continuation means for insurance-linked securities (ILS) and reinsurance markets.  We also spoke about how long the tail of the pandemic could prove to be, particularly in longer-tailed lines of insurance and when the industry may have greater visibility of the eventual industry-loss total, across insurance, reinsurance and insurance-linked security (ILS) markets.  The topic of hedging also came up and we talked about how important it may be for insurance and reinsurance firms to find ways to protect themselves against future pandemic losses, as COVID-19 impacts continue across the world.

Michael Bennett, Head of Derivatives & Structured Finance at the World Bank Treasury kindly joined us for an interview as part of our virtual ILS NYC 2021 conference.  He shared his thoughts on the World Bank's work in disaster risk financing and the use of insurance-linked securities (ILS) structures, such as catastrophe bonds, alongside traditional reinsurance, to help its member countries enhance their resilience.  We discussed his views on where the World Bank's use of insurance-linked securities (ILS) may evolve towards in the future.  This included how the catastrophe bond fits into disaster and other forms of risk financing, what has gone well and what the insurance-linked securities (ILS) market could perhaps do differently to support the expansion of this work.  Michael also explained what he believes needs to happen for uptake of sovereign ILS and catastrophe bonds to increase, as well as where more issuance could come from.

Marcus Rivaldi, Managing Director, Analytics at specialist ILS and reinsurance investment manager Twelve Capital, joined us to explore environmental, social and governance (ESG) practices in the insurance-linked securities (ILS) market, as part of our ILS NYC 2021 virtual conference.  We spoke about ESG (environmental, social, governance) and what the insurance-linked securities (ILS) sector needs to consider moving forwards.  Discussing some of the important issues that need to be addressed to ensure the ILS asset class can meet the demands of investors for ESG compatible returns.  Marcus also explained that the already large environmental, social and governance (ESG) investor community is poised to expand further, but in order for the insurance-linked securities (ILS) sector to really take advantage of the opportunity it needs to address certain challenges. Rivaldi highlighted inconsistency across the insurance and reinsurance balance sheet, with carriers being more eager to disclose information on the asset side of the balance sheet, but not so willing on the liability side. Furthermore, geographical inconsistency is also a hindrance, he added. Of course, it’s also going to be critical for the market to really demonstrate the understanding and management of environmental-type risks, which raises the climate factor and the capabilities of modelling for certain exposures.

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.