ILS investors need to speak up and ask for alternative model views: Karen Clark

At the ILS Bermuda Convergence 2026 conference today, Karen Clark, CEO and Co-founder of catastrophe risk modelling specialist Karen Clark & Company, urged the insurance-linked securities community and its investors to ask for alternative model views to be included in the deal flow that comes to market.

During a panel discussion about how catastrophe modelling can be reimagined, Clark highlighted that ILS deal flow is typically concentrated around views of risk from the main vendor models.

As technology advancements, next-generation models, artificial intelligence and new data sources are increasingly being adopted across insurance and reinsurance, Clark feels the industry would be well-served by more models getting into the offering documents and ILS deal analysis process.

She said that, at KCC, they already have a significant market penetration with primary insurers in the United States, but often these companies need to use a model that may not be the one they use for most of their internal analysis, when it comes to catastrophe bonds or ILS deals.

“It’s actually ironic, because they use our models for their own rate making, pricing, underwriting, reinsurance, exposure management. So they’re using our models for everything they do internally, and then the brokers like to use the incumbents, as you would say, the two I call the old models for various reasons,” she explained.

Continuing to state that, “It creates a problem. We do remodel the cat bonds for many investors. We do give the KCC view, so the KCC view is accepted. We’ve had insurers who have wanted to, they use our models for everything else, they wanted to use it for their cat bond, but the brokers and the deal managers said no, we can’t use another model, the investors won’t accept it, it’s just not going to go well. And they scare these companies that they can’t use it.

“I think one of the things is, investors need to speak up that you do value alternative views, second generation models. We don’t have to keep getting the same old, same old.”

Clearly Clark has a vested interest to push this idea, it would be wrong not to mention that.

But, the question of how to get more views of risk into the catastrophe bond and ILS deal process is one that comes up a lot in discussions with market participants and many in the ILS community would welcome a broader range of views on transactions.

As risk models become increasingly capable, we should expect new views of risk to become accepted within the ILS market. Many alternative views of risk are already being used and ILS managers typically adopt numerous sources of analysis and data.

Clark further said that the main vendor models used in the ILS market won’t have as much incentive to change, if they don’t see more competition in the ILS deal making process.

Later during the panel discussion Clark said, “What I think would be very useful for the market is, if we could have in the OC’s, in the documentation, multi-model views and even more importantly, more data disclosure.”

Saying that, what this would mean for ILS investors is, “The decision that will be changed is which contracts you’re putting more of your capital on, which ones are actually better, better modelled, have better data. The more data you have, the less uncertainty you have about that. The decision is really with how you’re going to construct your portfolio, what are the contracts that are going to be in your portfolio because we have better information.

“Tell the deal managers, the brokers that you want to see alternative models in these transactions.”