Fermat Capital’s John Seo added to terrorism risk-sharing committee

by Artemis on September 24, 2015

Encouragingly the U.S. Department of the Treasury has announced nine senior insurance and reinsurance leaders are to serve as members of the Advisory Committee on Risk-Sharing Mechanisms (ACRSM) and one is an ILS and catastrophe bond expert.

John Seo, Co-Founder and Managing Principal at cat bond and ILS specialist investment manager Fermat Capital Management LLC, is joining the other eight senior re/insurance execs on the committee which looks at the role that reinsurance and risk transfer can play in providing capacity for terrorism risks.

Seo has been a proponent of the ability of the capital markets to be a source of reinsurance capacity and for the use of catastrophe bonds and insurance-linked securities (ILS) as structures which could transfer some terrorism risk away from the U.S. government in the past.

Seo previously spoke to lawmakers about this, in a testimony to the U.S. House of Representatives, where he said that the ILS market had a growing ability to take on risks such as terrorism.

Seo said that an expanded ILS, catastrophe bond and alternative reinsurance capital market could make as much as $9 billion to $12 billion of third-party reinsurance and ILS capacity available to terrorism risks in the future.

Adding Seo to the U.S. Treasury’s committee on Risk-Sharing Mechanisms is therefore a positive move, as it ensures that ILS and the capital market’s will have their voice heard, alongside the committee members from the more traditional side of the insurance and reinsurance market.

The Advisory Committee on Risk-Sharing Mechanisms (ACRSM) is a body set up to provide “advice and recommendations” to the U.S. Department of the Treasury, via interaction with the Federal Insurance Office (FIO), focusing on the use of non-governmental, private market risk transfer, reinsurance and risk-sharing mechanisms to cover losses from terrorist events.

The nine committee members are:

Wendy Peters, Executive Vice President Terrorism Practice Group, Willis North America
John Seo, Co-Founder and Managing Principal, Fermat Capital Management LLC
Jonathan Clark, Property Treaty Reinsurance Broker, Guy Carpenter & Company LLC
Sean McGovern, Chief Risk Officer, Lloyd’s of London
William Donnell, President US P&C, Swiss Re
Erik Nikodem, Property Executive, AIG
Gregory Hendrick, Chief Executive of Reinsurance Operations, XL Catlin
Kean Driscoll, Chief Executive Officer, Validus Reinsurance, Limited
Michael Sapnar, President and Chief Executive Officer, Transatlantic Holdings, Inc.

“These nine individuals have a broad cross-section of insurance experience and expertise and bring a diverse set of perspectives to the ACRSM,” commented Michael McRaith, Director of the FIO. “I am looking forward to working with them in the months and years ahead as the ACRSM carries out its important mission.”

The ILS market will not all welcome terrorism as a risk to invest in, however a number of ILS managers are open to this and if risks can be structured, or parameterised, in order to contain exposures (perhaps excluding NCBR risks) then the ILS and capital markets will likely support any effort to transfer risk to them.

The committee contains a number of names that are actively involved in initiatives involving reinsurance and capital markets convergence, so it is to be hoped that a complementary use of traditional and alternative capital will be recommended as the right way to take some of the liability for losses from terrorism risk away from the government and its taxpayers.

Also read:

‘Reinsurance, capital markets reluctant to take on terrorism risk’.

S&P: Alternative reinsurance capital anticipated in terrorism risk.

Experts forecast a bigger role for ILS in terrorism insurance.

Is it time the capital markets helped out with terrorism risk transfer and reinsurance?

Could the alternative risk transfer market provide a terrorism backstop?

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