ILS market value demonstrated, positioned well for future: ILS NYC 2018 speakers

The impressive reaction of the insurance-linked securities (ILS) market to 2017 catastrophe events shouldn’t be a surprise and the marketplace has an opportunity to do even more in the future, according to speakers and attendees at Artemis’ second conference in New York.

Following on from last year’s success, Artemis held its second conference in New York City, in midtown Manhattan on Friday February 2nd, ILS NYC 2018. Thanks to a great response from our readership 295 attendees registered for the event, while the waiting list for spaces surpassed another 70 by the day of the event itself.

The day featured speakers from all over the globe, including executives from dedicated ILS funds, leaders of capital markets units of global insurance and reinsurance firms, executives from the broker community, and also leading figures at Lloyd’s of London, Florida Citizens, the World Bank, and Microsoft.

This year’s event focused on Building the Future of ILS, and after the catastrophe losses of 2017 attendees heard concrete examples of how the space responded and what this might mean for the future of the reinsurance market cycle, and the broader risk transfer environment.

In light of what’s been described as the ILS market’s first real test, market participants highlighted that it shouldn’t be a surprise to see and hear how well the ILS sector responded to third and fourth-quarter catastrophe losses, underlining how the participation of ILS in reinsurance helped primary and traditional players to stomach the losses.

Discussions surrounding the permanence of ILS appeared to have been put to bed prior to 2017 events, and speakers noted how the market’s reaction strengthens its position in the overall risk transfer industry as well as the outlook for the sector.

The distribution chain was explored, and attendees heard leading market participants talk up the potential for ILS to get closer to the risk, as well as expanding on traditional perils and giving the protection buyers more of what they want.

On the distribution chain, session leader Tom Johansmeyer, AVP – PCS Strategy and Development, Verisk Insurance Solutions, asked panel speakers; “Is distribution broken? Is there an opportunity to match ILS capital with the original insured on more than the niche corporate cat bond basis that we’ve seen?”

One message from the first panel of the day was that distribution certainly isn’t broken, but that it could be a whole lot better. And while ILS can come closer to the risk, one panel speaker suggested that it can’t get right next to it, without significant effort and cost.

After the devastating impacts of hurricanes Harvey, Irma, and Maria, combined with the powerful Mexico earthquakes and huge wildfires in both Northern and Southern California, session leader Rick Pagnani, Chief Executive Officer (CEO) of Mt. Logan Re Ltd., asked his panel on underwriting if anyone was “surprised at how well the ILS industry responded.”

The answer was simple, no. Attendees heard how the evolution of the ILS space in recent times, coupled with the willingness, maturity and sophistication of capital market participants meant that it shouldn’t have been a surprise to anyone that observes the ILS space at well the market responded.

The focus of the day then shifted to investing and the potential for catastrophe bonds and collateralized reinsurance to expand their remit and influence, and the panel was led by Luca Albertini, CEO of Leadenhall Capital Partners LLP.

“Innovation comes every year with new ideas,” said Albertini. “What might take off, is more of whatever the protection buyers do want to buy, given what is available is plentiful and reasonably priced.”

At some point during their discussions each panel mentioned and explored the high level of 2017 catastrophe losses, and during the third panel of the day it was explained how well the first catastrophe bond issuance after the events was received by the investor base.

Again, this highlights the permanence of both the ILS sponsor and investor base, regardless of losses, and one panel speaker explained how the catastrophe bond market “has bridged a gap between liquidity needs of a capital market environment, and the capital needs to the re/insurance community.”

John Seo, Co-Founder, Managing Principal, Fermat Capital Management, LLC, led the fourth panel of the day, which had a focus on closing protection gaps while looking to the future of ILS and its role in risk transfer.

Seo explained how influential organisations such as the World Bank and Microsoft, both of which had representatives on the panel, have roles to play in addressing the insurance protection gap, and attendees heard how “ILS really has passed a maturity milestone with surviving the last year of natural catastrophes.”

Looking to the future, panel speaker Cory Anger, Global Head of ILS Origination & Structuring, GC Securities, highlighted the importance of innovation and creativity.

“We can’t be beholden of taking the structures that work for insurers and reinsurers in property cat and expect that the same structures are going to work on all of these other risks, where there is a need. I do think that if we collectively can take from that framework and be a little more creative, more stuff will come out,” said Anger.

The final panel of the day featured a Q&A with industry leaders and the importance of data was brought into light, however, panel speakers were eager to underline the necessity and value in underwriting skill, and that the industry must be careful not to be too reliant on data.

One speaker suggested that part of the future growth of ILS is in preemptive risk transfer and mitigation, and the need to originate new risks was also discussed, alongside finding a balance between simplicity and complexity.

Building the Future on solid foundations is important for the continued success and expanding the influence of ILS, and we look forward to exploring more of these trends in New York next year, and hope you’ll join us.

We’d like to thank all our attendees for joining us on the day, hope you enjoyed the event and would love to see you back in New York next year for ILS NYC 2019, which will be held around the same time of year (date to be announced in due course).

To all our speakers, thank you for agreeing to participate, for providing candid, insightful and thought-provoking discussions and for supporting the event.

Finally, we’d like to thank all of our kind sponsors of the ILS NYC 2018 event, without whom the day would not have been possible. Your support is greatly valued.

For all enquiries regarding sponsorship opportunities for future Artemis events please contact us at [email protected].

Artemis’ next conference will be ILS Asia 2018, Singapore, July 2018. We will return to New York for ILS NYC 2019 in early February of next year.

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For all enquiries regarding sponsorship opportunities please contact [email protected].