Knowledge and understanding of the insurance-linked securities (ILS) asset class is on the rise in Asia, and while local expertise is a real benefit, it’s also vitally important to communicate early and persistently with the investor base, according to industry experts.
On the morning of the second day of our virtual ILS Asia 2021 event, held in association with our headline sponsor AM RE Syndicate Inc., a panel of experienced ILS professionals discussed investment management issues with a view to the Asian marketplace.
“There’s definitely an increase of awareness because we have a strong partner locally, with a strong team in Mitsui Sumitomo, and they’re doing a lot of work locally to keep discussing about what happened in the past, what the opportunities are in the future,” said Lorenzo Volpi, Partner, Leadenhall Capital Partners LLP.
Since the outbreak of the COVID-19 pandemic travel has been limited around the world and for an industry like ILS, which is built on relationships, this has created some challenges in terms of connecting with new investors.
But in spite of this, Volpi and the other panellists noted that through the use of technology it’s still possible to build relationships with prospectus investors and overall, developments continue to be positive.
In Japan, a region which has invested in non-life ILS for quite some time, Volpi emphasised a desire to continue to engage with existing investors to provide them with as much transparency as possible.
“We will get closer also to the new investors, and to convince them again that actually it is still worth maintaining or adding an allocation to non-life ILS,” said Volpi.
“On the life side it’s going well. There’s always been demand in Japan. So, definitely strong again. I think there’s investor interest in Japan, or at least they’re all monitoring the asset class,” he added.
According to Matin Burke, Chief Financial Officer (CFO) at Everest Re’s Mt. Logan Re Ltd., for investors in Asia and beyond, it’s vital to “really listen to the investor needs, and what are they looking to get out of their investment in ILS.”
The importance of communication around things like loss creep and climate change was highlighted throughout the panel, especially when considering new investors in the Asia region.
“I think if you build a partnership the right way and you solve your investor needs, what do they need for their portfolio, and you create that kind of win-win. Hopefully you can build a solution that can last several decades. Because it really is kind of partnership capital, in terms of how we think about supporting our franchise,” said Burke.
The expert panel debate also featured Donna Davis, an Associate at Frontier Advisors, who offered some thoughts on the appetite for ILS in Australia and also the challenges.
“There’s definitely a couple of headwinds in the market,” said Davis. “We’ve had some legislation changes, which we won’t touch on today because you’d have a whole other conference almost on some of those headwinds. But, I think, we’re seeing almost two sides of the coin in terms of appetite.”
According to Davis, while appetite from new investors has been robust, it’s the existing investors in the region that are perhaps more sceptical at this moment in time.
“I think the challenge we’ve found is existing investors are feeling a little bit bruised and battered by the recent loss years and some of those issues that we’ve talked about. And, I think, for new investors, to Lorenzo’s point, it is difficult, like you said, if you can’t meet face to face and really talk through the industry.
“But I think also there’s been a lot of layers and a lot of talk in the industry about things like climate change, about modelling risk, about intermediaries. All of those different concepts that make it feel like maybe it’s a bit more opaque, maybe it’s not quite as transparent, it’s a little bit harder to understand that end concept,” said Davis.
“I think the proposition of ILS as an asset class, cash plus 4 or even more, uncorrelated, it’s still a fantastic proposition… It’s not quite as well understood so maybe it feels riskier for the investor and so it’s getting them comfortable and understanding what those true risks are,” she added.
As well as the on-demand playback, we will be archiving every session from our online and virtual ILS Asia 2021 conference over on our YouTube Channel in the coming weeks and audio versions will also be uploaded to our podcast which you can subscribe to here.
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