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

The global captive insurance marketplace and how it is developing was the focus of our latest Artemis Live video interview and we learned that data is critical to help in effective captive formation.  Our latest Artemis Live video interview is with David Gibbons of PwC, a Partner and the Captive Insurance Leader at PwC Bermuda.  David works with some of the largest captive accounts in the world and delivers captive insurance solutions throughout the captive lifecycle.  In this interview we discussed some current captive insurance market conditions and trends David is seeing, both in Bermuda and globally.  Asking David how he views the current captive insurance market, he said, "If you gave me one word, I would say active. If you gave me two words, I'd say very active."  "I think that activity is on really two fronts. One is you're seeing new formations and you're seeing the speed from interest to formation move, from potentially one-to-three years, to a few months once a feasibility study is done," he explained.  "I think the other area of activity we're seeing is existing captives re-looking at the business they write, not only the lines, but the layers and as they negotiate pricing with reinsurers looking to see what portions of the business they may take that they have traditionally not taken."  On the Bermuda captive insurance market, Gibbons noted that it remains a leader, thanks to its strong and responsive regulator and regulatory environment, its adjacency to global reinsurance capital, and the abundance of local expertise and service providers.  He said the captive market remains niche, although it is growing and that it's vital to have talent on hand that understands what it means to be at the cutting edge of where the captive insurance industry has been and where it's going, while access to data is seen as a critical feature for effective captive insurer formation. Watch the full video interview for more insights from PwC Bermuda's David Gibbons.

Establishing insurance-linked securities (ILS) investment management operations and the impact of recent international tax developments in the industry was the focus of our latest Artemis Live video interview.  Our latest Artemis Live podcast episode is with Scott Slater of PwC, a Partner and the Tax Services Leader at PwC Bermuda. Scott also leads PwC in the Caribbean’s International Tax Services group, which is based in Bermuda and the Cayman Islands. In this interview we discussed some recent international tax developments and how they could affect insurance, reinsurance and also insurance-linked securities (ILS) interests. Slater explained that a key area of focus for his practice and team, in relation to insurance-linked securities (ILS) market participants, is the controlled foreign corporation (CFC) rules and the passive foreign investment company (PFIC) rules. “In the ILS space, most of these structures are either CFC’s or PFIC, and our practice specialises in giving the information that those US investors need to complete their tax returns and satisfy their reporting requirements for making that foreign investment,” he said. Slater also explained that a component of the work his team at PwC undertakes is to help ILS investment managers identify the right structures for their businesses, from a taxation point of view. “It's an interesting conversation, particularly with those asset manager backed ILS vehicles, to explain to them what has to happen in Bermuda and the people they need to get in Bermuda to satisfy those requirements, to mitigate the risk that they've somehow created a taxable presence in the US. “So we work with a lot of clients around the structure, but also the people functions and the activities that need to happen from Bermuda, to achieve that tax result,” he commented.  Listen to this podcast episode for more insights from PwC Bermuda's Scott Slater.

This was the third session of the day at our Artemis ILS NYC 2023 conference, held in New York on February 10th 2023.  This conference was Artemis' largest insurance-linked securities (ILS) event to-date, with over 390 registered attendees enjoying a wide-range of insightful speaking sessions and networking opportunities throughout the day.  Attendees came from around the world to hear thought-provoking discussions from insurance-linked securities (ILS) market leaders, all under the theme of "(Re)construction & Renewal(s)."  This third podcast from our ILS NYC 2023 conference features a panel discussion focused on the Florida insurance and reinsurance market, challenges that must be overcome, as well as the ILS industry perspective on that, titled: (Re)constructing a healthy market.  The panel discussion was moderated by Judith Klugman, Global Head of ILS Distribution, Swiss Re Capital Markets.  She was joined by: Jennifer Montero, Chief Financial Officer, Citizens Property Insurance Corporation; Michael Stahel, Partner/Portfolio Manager, LGT ILS Partners Ltd.; Adam Schwebach, EVP, Tampa Branch Manager, Gallagher Re.  The discussion was wide-ranging around some of the challenges faced in Florida, the work that is being undertaken both legislatively and at re/insurers to improve the situation, as well as the appetite of reinsurance and ILS capital to be deployed in the state and what else might help to encourage more risk capital back to Florida.  The panellists discussed some of the challenges this side of the market has faced in recent years, while also highlighting steps that have been taken to help in rebuilding investor confidence and also looked ahead to the prospects for a return to growth.  Listen to the full podcast audio of this Florida insurance, reinsurance and ILS focused panel discussion, for more insights into that important peak peril region, the prospects for improvement there and what else might need to change to attract more capacity back to Florida.

When it comes to underwriting cyber risks, capital, whether traditional insurance and reinsurance, or alternative from the insurance-linked securities (ILS) market, "has to be rewarded", Matt Harrison from risk modelling and analytics specialist Moody’s RMS, told us in our latest Artemis Live interview in April 2023.  As Director of Product Management for Cyber at Moody’s RMS, Harrison sets the strategy on building their cyber risk focused modelling products and analytical solutions.  He also spends his time helping insurance-linked securities investors and funds to understand cyber risk as a class of risk to expand their allocations to.  Harrison explained that, when it comes to building models for cyber risk, Moody's RMS is taking a targeted approach.  "I'm not going to build this huge comprehensive suite of stuff and waste my time, I really want to be targeted about that.  "Really from a from a model perspective, we try and divide the world into like perils. I think sometimes we hear this language about scenarios and scenarios are very bespoke things. We've got to think much more holistically, or otherwise we're not covering the whole risk spectrum.  "So we think about cloud outages, data breach, malware, and ransomware, things like DDoS so attacks against networks and in each of those, we want to build a model that really tries to describe the physics of the system, if that if that's a sensible way of describing it," he told us.  Later in the interview, Harrison also highlighted the need for capital to be adequately rewarded for taking on cyber exposures. " One of the problems for the insurance and reinsurance industry is, there is a limited amount of diversification within cyber. There's only so much diversification that you can find, and therefore that capital has to work harder, it has to be rewarded," Harrison said. "I think that's why the demand is so high for capital to come in, to really drive it. But the way that we see it is that it has to pay a risk premium, because of that diversification." Listen to the full podcast episode for many more insights on cyber risk and cyber risk models from Moody's RMS' Matt Harrison.

This was the second session of the day at our Artemis ILS NYC 2023 conference, held in New York on February 10th 2023.  This conference was Artemis' largest insurance-linked securities (ILS) event to-date, with over 390 registered attendees enjoying a wide-range of insightful speaking sessions and networking opportunities throughout the day.  Attendees came from around the world to hear thought-provoking discussions from insurance-linked securities (ILS) market leaders, all under the theme of "(Re)construction & Renewal(s)."  This second session from our ILS NYC 2023 conference features a panel discussion focused on the private ILS and collateralized reinsurance side of the market, titled: (Re)building confidence.  The panel discussion was moderated by Mark Gibson, Head of Products & Solutions ILS, Schroders Capital.  He was joined by: Kathleen Faries, CEO, Artex Capital Solutions; Eveline Takken-Somers, Senior Director, Lead Portfolio Manager - Insurance Portfolio, PGGM; and Chin Liu, MD, Director of ILS, Fixed Income Solutions, Responsible Investment Research, Amundi US.  The discussion focused on the largest segment of the ILS market, where collateralised reinsurance and private ILS assets are structured and invested in.  The panellists discussed some of the challenges this side of the market has faced in recent years, while also highlighting steps that have been taken to help in rebuilding investor confidence and also looked ahead to the prospects for a return to growth.  Listen to the full episode for a private ILS and collateralized reinsurance focused panel discussion, as well as more insights into the potential for the ILS market to continue growing its importance in global reinsurance circles.

This was the first session of the day at our Artemis ILS NYC 2023 conference, held in New York on February 10th 2023. This conference was Artemis' largest insurance-linked securities (ILS) event to-date, with over 390 registered attendees enjoying a wide-range of insightful speaking sessions and networking opportunities throughout the day.  Attendees came from around the world to hear thought-provoking discussions from insurance-linked securities (ILS) market leaders, all under the theme of "(Re)construction & Renewal(s)."  This first session from our ILS NYC 2023 conference features a panel discussion focused on the cat bond market, titled: (Re)setting expectations in catastrophe bonds.  The panel discussion was moderated by John Seo, Co-Founder, Managing Director, Fermat Capital Management, LLC.  He was joined by: Mariagiovanna (Patti) Guatteri, CEO / CIO, Swiss Re Insurance-Linked Investment Advisors Corporation; Philipp Kusche, Global Head of ILS & Capital Solutions, Howden Tiger; Lorenzo Volpi, Deputy CEO, Managing Partner, Leadenhall Capital Partners LLP; and Chris McKeown, Chief Executive, Reinsurance, ILS & Innovation, Vantage Risk.  The discussion focused on current catastrophe bond market dynamics, asking whether higher returns are here to stay and where the market is destined to move towards through 2023 and beyond.  The panellists also discussed the differences between cat bonds and other ILS formats, such as collateralized reinsurance, debating how different they should be considered by investors, as well as what the relative attraction is to them.  Listen to this episode for a catastrophe bond focused panel discussion featuring more insights into the potential for the ILS market to continue growing its importance in global reinsurance circles.

The World Bank is "extremely pleased" with the response from investors and reinsurance markets to the recent placement of $630 million of catastrophe bonds and catastrophe swaps to protect Chile, according to Jorge Familiar, Vice President and Treasurer.  Jorge Familiar of the World Bank joined us in March 2023 for an Artemis Live interview to discuss the recent successful placement of $350 million of International Bank for Reconstruction and Development (IBRD) issued catastrophe bonds, alongside $280 million of catastrophe swaps, to provide the Republic of Chile with $630 million of earthquake insurance protection.  Familiar explained that the investor response was gratifying and said that it was important to time the issuance carefully, in order to maximise execution for the country.  "We are extremely pleased with the response," Familiar said.  "Markets have been going through a period of volatility, and there are many elements of uncertainty. So, you know, finding the right time and the right structure to do this was was important and I don't think that the outcome could have been any better," he explained.  World Bank Treasurer Familiar added, "I'm very pleased with the result of the operation, by going simultaneously in bond and swap form really created value for for Chile.  "The size of the operation kept going up as market interest started materialising and then the pricing of the operation came out at very reasonable terms.  "So, you know, strong demand that helped us create significant value for Chile."  Listen to the full episode for more insights from World Bank Treasurer Jorge Familiar.

The “denominator effect” and investor rebalancing across asset classes has driven some of the biggest challenges for the insurance-linked securities (ILS) market in recent months, Chris Parry, Global Head of Capital Partners at RenaissanceRe, told us in our latest Artemis Live interview in March 2023.  Chris Parry leads the third-party capital, insurance-linked securities (ILS) and joint-venture businesses at the global reinsurance company.  He joined us in March 2023 to speak about the state of the insurance-linked securities market, the ILS investor trends he is seeing, his outlook for the rest of this year, and the strategic priorities for the RenaissanceRe Capital Partners business.  Discussing the current state of play in ILS and third-party reinsurance capital, Parry said the market has faced its share of challenges of late.  Parry explained that this "denominator effect" meant some large institutional investors have had to rebalance their portfolios, having become overweight to ILS and reinsurance after global asset values declined in the last year.  This is a trend that has yet to play out fully, but Parry is also positive and his unit at RenaissanceRe has successfully raised new funds, while the multi-strategy approach of the RenRe Capital Partners platform has provided greater optionality for investors to access ILS and reinsurance returns, he believes.  Listen to the full episode for many more insights from RenaissanceRe's Chris Parry.

Bermuda's insurance and reinsurance market is readily taking steps to embrace ESG within their business models, but there is a lot to do and the work can become very technical, according to Marisa Savage at PwC Bermuda.  Our latest Artemis Live interview is with Marisa Savage of PwC, a Partner in the PwC Bermuda Insurance practice, as well as leader of the PwC Actuarial Services practice for the Caribbean region.  Also the ESG Leader for PwC Bermuda, in this interview we discussed the importance of environmental, social and governance considerations.  Savage also explained how Bermuda's insurance, reinsurance and insurance-linked securities (ILS) market is adopting ESG within their business models and the important role regulation is playing in driving these trends.  She laid out the current state of play saying, "What are companies doing to move the ESG needle. So I think most big players, you can see when you talk about the underwriting side of things, they're making commitments, say, by 2020 or 2030, to stop underwriting coal fired projects or other carbon intensive exposures.  "They're also looking at the investment side of their balance-sheet to look at the mandates they have for their advisors, to make sure that what they're investing in is ESG friendly. Those are the two areas that companies are really looking at, to evolve in, and to make their mark on the ESG side of things."  However, Savage noted that making their mark in ESG-terms requires good governance, something PwC works to assist their clients with.  "We are a trust and solutions based organisation, that is our value proposition and on the trust side, that's going to mean delivering assurance, on ESG reporting matters. As standards come out, they're going to be requiring assurance and we are well placed to provide that assurance for our clients.  "On the solutions side of things, working with clients on ESG strategy, on evaluating governance frameworks and things like that."  Listen to the full episode for more insights from PwC Bermuda's Marisa Savage.

The Bermuda insurance and reinsurance market has weathered recent global volatility and elevated levels of catastrophe events extremely well, demonstrating its resilience, according to Matt Britten at PwC Bermuda.  Our latest Artemis Live interview is with Matt Britten of PwC, a Partner in the PwC Bermuda Insurance and Reinsurance practice, as well as the Risk Assurance practice leader there.  Britten joined us to discuss the state of the market in Bermuda, touching on insurance, reinsurance and also insurance-linked securities (ILS) conditions there.  We also spoke about the volatile macro environment around the globe and how the Bermuda re/insurance and ILS market has navigated this.  Britten explained that, "When you think about just how challenging the environment has been for the Bermuda market, the multiple years of cat losses exceeding $100 billion, far-reaching impacts of the global pandemic, and more recently, rampant inflation and the rapid rise in interest rates, I think you have to say that the Bermuda market has weathered extremely well.  "It's shown fantastic resilience, it continues to innovate and it remains a market that attracts new capital and new entrants."  On the need for re/insurers and ILS firms to demonstrate they can deliver an acceptable level of returns to their capital providers, Britten feels the newly hardened reinsurance market will make it more feasible for costs-of-capital to be sustainably met.  He added, "I definitely feel that 1/1 of this year was a turning point, that should start to allow reinsurers to have a platform from which they can start generating those returns that will help them meet their cost-of-capital."  Listen to the full episode for more insights from PwC Bermuda's Matt Britten.