In casualty ILS motivations are key, timelines must be realistic: Trahan, Calidris

Casualty insurance-linked securities transactions are complex and require strong alignment, which makes finding strategic partners and understanding their motivations key, while at the same time given the complexity of arrangements such as casualty sidecars, realistic timelines are important, Philippe Trahan of Calidris Investment Partners said yesterday.

Trahan, Co-founder and Co-CEO of insurance-focused investment manager Calidris Investment Partners, was speaking during a casualty ILS focused panel session at the ILS Bermuda Convergence 2026 conference yesterday.

As a company with a focus on opportunities in these longer-tailed areas of insurance and reinsurance, Trahan noted that Calidris recognises the time required to both get comfortable with counterparties and asset managers involved in casualty transactions, as well as being cognisant of the time needed to get to well-structured and aligned deal outcomes.

“We spend a lot of time on finding partners and establishing strategic partnerships. What we want to avoid is being a hedge. So we focus on motivations: whether it’s an MGA or broker facility or an insurer or reinsurer considering launching a sidecar, why are they doing it, and what are their motivations?,” Trahan explained.

“What I find is that it’s a somewhat different approach. Transactions in this marketwere mostly done on a bilateral basis between investors and counterparties, so this year’s move toward a syndicated market, which is a normal and natural evolution, shows that it’s growing and has legs.

“It does bring some additional complexity, and that requires a realisation on the broker or counterparty side. Once you’re comfortable that their motivation is to achieve a partnership that will ideally be scalable and repeatable, and these require a lot of time from the C-suite, you know they won’t do this as a one-year trade and just disappear. That’s quite helpful.”

He went on to suggest that timelines need to be realistic, as the complexity and work-effort involved in casualty ILS deals means that they are unlikely to be completed particularly quickly.

Trahan said, “The other obstacle we find is unrealistic timelines. These sidecars take 6 to 12 months to complete, so anyone who comes now wanting to do a sidecar by year-end has, in my view, a wholly unrealistic timeline. There’s a fair amount of diligence required.”

There also needs to be an understanding of the additional complexities that go into structuring and creating a transaction that needs to take into account both the insurance liabilities and asset management sides of the equation.

Trahan continued, “There’s a lot of discussion with the other side, whether that’s a broker’s securities team or the counterparties themselves. If they’ve discussed ILS in the past, they’ve probably discussed using cash or T-bills as collateral. Starting to discuss CLOs and rated feeder notes generally brings in a different group within that organisation, or means you end up working only with bigger organisations. Or, if you’re dealing with an MGA group, you bring fronters into the mix, which makes things more complex and takes more time. That’s another dynamic we find.”

Trahan also discussed the critical importance of alignment in casualty ILS transactions, highlighting that expectations need to be set, particularly around alignment on both the potential upside and downside of any partnership arrangement on casualty risks.

He explained, “The last element I would point to is the willingness of counterparties to share in the upside and the downside. Sliding scale commissions, for example, are one way to further strengthen alignment. Ultimately, they’ll know their book far better than we will.

“We’ll spend a lot of time discussing how you arrive at your view, and then we’ll build a sliding scale around it. This isn’t about me trying to come to my own view of your loss ratio, which can lead to asymmetric transaction. That’s not how we think of it, and that requires more time as well.”

Trahan’s comments all speak to the complexity of casualty risks and the structural innovation that has come about through the use of insurance-linked securities technology to enable investors to participate in these areas of insurance.

They also highlight the need for a disciplined approach and a willingness to fully-engage with partners on transactions, to avoid any unexpected or uncertain outcomes.