ILS market development has been positive for investors: Hilti, Credit Suisse

As the insurance-linked securities (ILS) market continues to expand its remit and reach, it’s important to consider the efforts of the fund and investment side of the space as it looks to service a growing investor base.

During the opening day of Artemis’ virtually held ILS NYC 2021 conference, Niklaus Hilti, Head of Insurance-linked Strategies at Credit Suisse Insurance Linked Strategies, discussed some of the things the market had done well in terms of servicing its investors.

“I think the number one element which is critical and which I see as very positive is the ILS tax treatment, but also ILS frameworks have expanded in a number of jurisdictions,” said Hilti.

While Bermuda remains the most prominent ILS domicile in the world and other jurisdictions such as the Cayman Islands and Guernsey do play a role, other regions are eager to get in on the act and enable the facilitation of ILS business on their shores.

Of course, Singapore’s grant scheme, which covers certain costs of catastrophe bond issuances, has helped the region become an attractive ILS hub in Asia, and a similar scheme being proposed in Hong Kong suggests another Asian jurisdiction will be available in the future.

Add to this the fact the UK ILS regime continues to gain traction and it’s clear that over the past decade, domicile optionality has increased for both investors and sponsors alike.

“This is something which I think is a positive thing for the long-run. It gives more channels where risk can be issued, where risk transfer can happen, so I think this is a positive thing,” continued Hilti.

Hilti said that another important and positive development that helps to better service ILS investors is the expansion in the range of structures available from different regulated jurisdictions, which now means there are multiple “classes of reinsurers that are fit for the purpose of ILS.”

“And, on the fund side,” he continued, “it’s a similar development where you see more and more fund structures investing into ILS. These can be more regulated, like interval funds, these can be UCITS funds, these can be less regulated from a number of jurisdictions.

“So, again, I would say there’s a huge flexibility around a lot of different jurisdictions where one can set up those types of fund investments.

“I think this is important because it allows the ILS industry to actually distribute to the different investors and to also meet different regulatory frameworks, which have been changing over the last decade with an enormous pace. And, I feel that the ILS industry was actually doing a very good job in meeting these changing and higher requirements from a regulatory point of view, and has a variety of fund formats to distribute to investors. So, pretty positive developments, I would say.”

The session, which was broadcast first to registrants on Friday 5th Feb, can now be viewed below:

Every session from ILS NYC is now available more broadly via our Artemis Live video channel and audio versions are available via our podcast as well.

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