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.

“What we spend a lot of time on, we’re really more focused on finding partners, establishing strategic partnerships. What we want to avoid is we don’t want to be a hedge. So therefore motivations as to why, whether it’s an MGA or broker facility these days, an insurer or reinsurer that is considering wanting to launch a sidecar, why is it that they’re doing it, and what are their motivations?,” Trahan explained.

“What I find is then, it’s a bit of a different approach. I would say it’s a market that was mostly done on a bilateral basis between investors and counterparties, and so this year with the kind of syndicated market, which is a normal and natural evolution, it actually shows that it’s growing, it has legs.

“It does bring some additional complexity, and there’s a realisation that’s required on the broker or counterparty side. Once you’re comfortable that their motivations are trying to strive to achieve a partnership, that will ideally be scalable and repeatable, these require a lot of time from the management suite. So they don’t do this for a one-year trade and just disappear. So 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 is, we find, unrealistic timelines. These sidecars take six to 12 months to do, and anyone that comes now with a sidecar wanting to do it by year end, that’s wholly unrealistic timelines in my view, there’s a fair amount of diligence that’s 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 you have with the other side, that is either the securities team of a broker or generally with counterparties, that if they discussed ILS markets in the past, they probably discussed using cash, T-bills as collateral. So starting to discuss CLOs and rated feeder notes, that generally tends to bring a different group within that organisation, or you only end up working with bigger organisations. Or if you’re dealing with an MGA group, you bring fronters into the mix, and that just makes things more complex and just takes more time. That’s another dynamic, another element that 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 willingness for counterparties to share in the upside and the downside. So having to further strengthen the alignment, sliding scale commissions for example is one of those elements that just show more alignment. Because ultimately they’ll know their book way better than we will.

“We’ll spend a lot of time discussing how you come with that view, and then we’ll build in a slide around it. This is not me or you trying to see whether I have a different view, a lower view of your loss ratio, so there’s an asymmetric transaction that takes place. That’s not how we think of it, so 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.