Bringing together the capital markets and natural catastrophe risk in reinsurance, makes “deep economic sense”, according to the CEO of Swiss Re, as leveraging ILS capital is a win-win-win for his company, Christian Mumenthaler explained in our recent interview.
Christian Mumenthaler joined us for a new Artemis Live video interview just in advance of the 2022 Monte Carlo Rendez-vous meetings.
Swiss Re’s insurance-linked securities (ILS) activities have become increasingly extensive in recent years, as the company has begun managing more capital on behalf of third-party institutional investors, which is benefiting its reinsurance business in a number of ways.
Discussing the important role of ILS capacity and capital market investors in reinsurance, Mumenthaler explained to Artemis that there is a clear role for the capital and that it’s an important one.
“There’s this huge protection gap in the world, a lot is in the nat cat space, it’s really gigantic and it’s clear that, fundamentally, if this was to be closed, you want to close this, reinsurers cannot take it.
“It’s already peak risk for all reinsurer balance sheets, we’re at the limit,” the Swiss Re CEO said.
Mumenthaler had a direct hand in developing the Swiss Re ILS and capital markets business, having managed those activities at the reinsurer in the early 2000’s.
As a result, he has a clear vision for its importance as a source of capital that is complementary to Swiss Re’s, while also providing additional earnings opportunities for the company he runs.
“From a societal point of view, you need to find a solution,” Mumenthaler continued. Adding that, “Capital markets, I think, for this particular risk, are extremely well suited.”
He noted that, “istory has proven us right in that,” saying that, “To make sure there is an influx of capital, from capital markets, for this type of risk makes a tonne of sense.
“We really see this as a win-win-win situation.”
He went on to lay out why this is a win for all sides.
“Our clients get access to capacity, and then investors, going through us, have access to our knowledge and access to the risk, while we for ourselves can make additional earnings, by taking on more risk which we then share with our investors.
“So I think it’s a system that’s extremely solid, because it makes deep economic sense.”
The full video interview is embedded below, or can be viewed in full, along with previous Artemis Live video interviews here.
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