Clarity of ILS terms “super-important”, healthy price rises seen: Swiss Re’s Ojeisekhoba

For the insurance-linked securities (ILS) market, just as much as for insurance and reinsurance underwriters, the clarity of terms and what is actually covered under contracts is “super-important”, Swiss Re’s CEO of Reinsurance Moses Ojeisekhoba said this morning.

During the reinsurance firms virtual media briefing today, held due to the cancellation of the Monte Carlo Rendez-vous in 2020, Ojeisekhoba explained that the industry as a whole is realising the importance of making coverage terms absolutely clear.

The pandemic and social inflation have together demonstrated what can happen when terms and conditions in reinsurance aren’t clear enough.

Now, the insurance-linked securities (ILS) market has experienced the effects of a lack of clarity, or ambiguity in coverage, through the loss creep caused by social inflation and also the threat of losses and trapped collateral due to COVID-19 related business interruption.

Commenting on the ILS market, Ojeisekhoba said, “One thing we see that is super-important, is the issue of wanting to make sure there is clarity.

“We’re clearly seeing in the primary market, reinsurance market and ILS market, that there is far greater clarity of coverage, that’s one of the main trends we’re seeing.”

Thierry Leger, CUO of Swiss Re explained that the ILS market has been seeing some meaningful price increases.

He also said, “The ILS space is always very interesting for us, as Swiss Re is a very active actor in the space.

“The ILS market has been going up and down a bit with the crisis and nat cat losses.”

Ojeisekhoba ventured more detail, saying, that on ILS price rises, “They’re quite healthy, the price increases we’ve seen. Take Florida for example, the price increases were in the 20% range.”

Ojeisekhoba’s comments came as Swiss Re noted this morning the importance of underwriting discipline and achieving technical underwriting profits, something the ILS fund market is also very focused on at this time.

Establishing clarity of terms, as well as what is included and covered within ILS contracts, is key to maintaining expected returns for investors.

Alongside price increases in ILS, the increasing focus on underwriting terms and coverage can only help ILS fund managers to deliver more stable returns over the longer-term, a clear benefit for their investors.