ILS integral to the business, brings capital to big problems: RenRe CEO O’Donnell

Insurance-linked securities (ILS) are integral to the business of insurance and reinsurance and an ideal solution for bringing capital to the big problems facing society, according to RenaissanceRe CEO Kevin O’Donnell.

Giving a keynote speech at the ILS Bermuda Convergence 2019 conference today, the CEO of Bermuda headquartered global reinsurance firm RenaissanceRe (RenRe) discussed his views on the ILS market, what has changed and what needs to be learned from recent events.

Having begun his career in ILS in the 90’s, working on early attempts to bring catastrophe risks to the capital markets through CBOT options trading, O’Donnell said that after more than two decades ILS has become an important piece of the global risk capital base.

“I believe that ILS capital is an integral part of our business.

“When I think about what a company looks like to be successful in this business, it is in my opinion one bringing all forms of capital to all forms of risk,” O’Donnell explained.

He positioned the ILS market alongside the traditional as something less alternative and more a vital component of the ability to underwrite business as usual.

Saying that the capital markets and ILS are a key piece of how he thinks about reinsurance and the role that firms like his play, which is only becoming more important. However, he urged the industry to do more.

“Are we putting our resources to societies biggest risks, yes, but I think we have much more to do,” he said.

Explaining, “We’re looking at a world where it is becoming more likely that we’re going to have severe events, but we’re not keeping pace with that change by continuing to provide capacity.

“As bad a disaster as climate is for society, it does create opportunities for us to bring more capital to ease the pain of a changing world.”

He went on to highlight the role of insurance, reinsurance and the capital markets in becoming capacity providers to support society through its challenges, particularly in helping to buffer society against some of the biggest problems it faces.

“When I think about this from the perspective of our industries, we are doing something that is good. We are bringing capital to the big problems.

“The big problems are becoming more likely and more impactful and we are working to close the protection gap and ease the burden for both the developed world and the underdeveloped world to make sure the financial impacts from natural catastrophe are diminished,” he told the audience at Convergence 2019.

He explained that while the ILS market has faced its problems and has work to do in becoming a better communicator to its investors, in how losses and loss development are tracked and reported, he still believes strongly in ILS capitals continuing and growing role.

Closing his speech by saying, “At RenaissanceRe we would not have built the things that we’ve built, we would not be the company that we are if we didn’t think ILS had a permanent role to play.”