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Original Risk: A Society for Change Agents

As reinsurers react in Monte Carlo ILS managers keep cool and carry on


The major global reinsurance firms have made clear their opinions on, and reactions to, the recent flow of capital into the reinsurance market from third-party investors, with sometimes defensive statements that can leave listeners wondering whether the nervousness runs deeper than reinsurers are making out.

Much of the news coverage in the broader reinsurance industry press over the course of this years Monte Carlo Rendezvous reinsurance event has revolved around alternative capital and the impact it has had on the reinsurance market. Reinsurers statements have received significant attention and there’s been plenty to talk about regarding brokers forecasts for the insurance-linked securities (ILS) and alternative reinsurance capital market as well.

While these statements have been loud and clearly intended to be broadcast across the sector, one group of people keeping their heads down, sitting in the cafes and bars clearly being productive and getting business done, are the managers and investors of much of this alternative capital.

Keeping cool in Monte Carlo is easier said than done, the climate doesn’t always allow for that, but the ILS and asset managers have successfully managed to do this, not coming forward with statements to counteract any comments from other areas of the industry, preferring to focus on making the Rendezvous a profitable trip.

Artemis has spent time with many of the industries managers and some investors in recent days and the general attitude is one of calm and a confidence that ILS business and the deployment of alternative capital into the reinsurance sector is largely a stable and growing business.

With some choosing to call third-party capital ‘dumb money’ and others extolling the virtues of having a more diverse business model you might think the ILS managers would be getting hot under the collar.

That’s not the impression they give. The general opinion from asset managers and investors in the space is that the best reaction is to continue offering investors unique solutions and mechanisms to access the returns of the reinsurance and catastrophe risk market. Striving to broaden the investor base, deepen the relationships with investors, cedents and sponsors, looking at ways to enhance the protection offered and bringing new perils to the asset class are all topics mentioned in our discussions.

The quality of relationships is one area that the large traditional reinsurers have discussed at length, the value placed on being there to provide cover over and over at renewals for years to come is a real asset that the reinsurance market has in abundance. But for ILS managers the sector is still new and the investor base grows as the asset class grows, however they are extremely cognisant that relationships are also key to the growth of alternative capital in the market.

Every ILS specialist we spoke with over the last few days expressed a desire to enhance solutions to meet sponsors and cedents needs, to create new vehicles for investors and to provide real client focus in everything they do. ILS managers and investors do, in the main, have a desire to build and maintain the same kind of relationships that reinsurers and their clients so value and want to be there to become trusted partners of insurers and reinsurers.

In fact a number of investors have stressed the partnership that investors, or asset managers, and reinsurers can build, helping each other to grow both traditional and non-traditional sides of the business. Some investors and managers of capital want to know that they can deploy capital alongside rated players and they want the rated reinsurers to be there for the long haul.

So as the ILS and alternative reinsurance capital market continues to mature, investors and managers want cedents to be able to rely on them being there for future renewals. An ability to somehow reinstate covers is a recognised area that the market wants to improve in and a number of people told us they are actively looking at this as an extension or enhancement to their offerings.

So while many in Monte Carlo are reacting to alternative capital, making it the talking point of the event for a lot of attendees, the people most heavily involved in alternative capital as a market have their heads down, are keeping cool and carrying on with business as usual.

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