While the insurance-linked securities (ILS) market may currently be seen as at an inflection point in its history, the expectation is that it will go on to prove itself a long-term and sustainable source of capital for the insurance industry, according to Scott Purviance.
The CEO of AmWins Group Inc., the global distributor and servicer of specialty insurance solutions, said that the ILS market is currently poised for growth, but also pausing to reflect on and deal with the impacts and fallout created by the major catastrophe losses of the last two years.
As a result, his company notes that currently there are some changes emerging in how investors allocate their funds to the sector.
Purviance said, “We are at an inflection point with the ILS market—a stage we haven’t reached previously with investors seeing existing capital tied up beyond year-end. However, we continue to believe that ILS capital will be a long-term sustainable source of capital for our industry.”
AmWINS believes that the ILS market will continue to expand in 2019, but notes “a difference in how investors are allocating their funds in light of two years of significant losses.”
Changes in the way capital is allocated to risk may involve moving from one ILS strategy to another, finding new ILS fund managers, backing reinsurance instead of retrocession, or finding new partners that can originate risk directly for you, as an investor.
“Historically, alternative capital was deployed deeper in the value chain. Today, investors are increasingly moving toward collateralized reinsurance, which allows them to develop relationships with MGAs and deploy capital behind more defined pools of risk,” explained Ben Sloop, COO of AmWINS.
AmWINS has itself got a history of helping originators of insurance risk to connect more directly with the capital markets through its MGA platforms.
Here, the firm believes it is well-positioned to help retailers of insurance products to leverage the efficiencies of the capital markets, using AmWINS as a partner to achieve that.
“The marketplace is very complex, so retailers need a wholesaler who can understand the market and be positioned to make use of available capital,” Sloop said. “Particularly as ILS funds move forward in the value chain, we can help access that capital in a more direct and effective fashion.”