When discussing the health of the insurance-linked securities (ILS) sector too often the state of the reinsurance market is the bellweather, but Rob Procter, CEO of ILS investment specialists Securis Investment Partners LLP, believes that the future has never looked brighter.
Speaking at the Securis investor day in London yesterday, to an audience of end-investors, partners and ILS industry colleagues, Procter explained that despite the doom and gloom that is often talked about the state of insurance and reinsurance markets, there is plenty to be positive about.
“CEO’s of traditional reinsurers are in a defensive, shoring-up mode. I think that’s accurate, but I could not feel more differently about our business.
“I think the opportunity set for ILS has never been better,” Procter declared.
He highlighted that there are opportunities on both sides of the business, with Securis clearly positioning itself as an insurance and reinsurance linked asset management rather than as a re/insurer.
ILS assets remain a paltry 0.2% of global invested pension fund assets, he explained, which means there is ample opportunity to increase assets under management and become more influential in reinsurance markets.
At the same time, around 70% of global natural catastrophe losses remain uninsured, despite the inroads that ILS and reinsurance markets have made.
“Most of what ILS markets do today does revolve around property catastrophe business. But if I think about what will change in the future this is one clear aspect. We will move, as a marketplace, away from such a dominance of this risk and we will look at other risks,” Procter forecast.
One of the key characteristics for the ILS market in the future will be its ability to increasingly move beyond pure catastrophe exposed risks, and into new lines of business. Securis has itself begun this process, with its E&S property underwriting, areas of specialty risks it is involved in and by investigating potential new avenues such as cyber risks.
Procter also sees ILS playing a greater social role in the future, with Securis having ambitions to find ways to deploy capital profitably into provision of disaster risk transfer.
He said; “From a social perspective, providing relief after disasters, humanitarian relief, very little has been done in this area and I think this is a space that ILS could have a place to play in, in the future. This is something we are looking at internally, how can we structure that, how can we think about that.”
Looking to the future for the insurance-linked securities (ILS) market and Securis in particular, Procter is bullish about the potential for advanced technologies to play an important role in ILS.
He explained; “Looking back at the last few years, ILS has changed, arguably disrupted, one end of the value chain in insurance, the provision of capital supporting certain sorts of risk.
“But there’s a large part of the value chain that has yet to be disrupted. I think technology, harnessing big data, using it well, with the speed to process that data in ways that were simply unavailable previously, I think is going to revolutionise this business in the coming years.”
The ILS market and ILS investment fund managers, such as Securis, are going to find technology playing an increasingly important role, as algorithms, data, artificial intelligence, trading technology and product distribution are all impacted by the Insurtech wave.
The ultimate benefit from this step-change will accrue to all parties, the client, the investor and the ILS investment manager, as all stand to benefit from added efficiency due to the impact of technology on this still growing and developing market.
“If we can harness those strengths and the developments in our business, and I believe we will by being creative, nimble and flexible, then I think we have a bright future,” Procter closed.
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