As the insurance-linked securities (ILS) market looks towards year-end and into the new year, investors are showing appetite for structures and strategies from across the ILS and broader insurance and reinsurance universe, according to Stephan Ruoff, Head of Schroder Secquaero.
“We see on the one end of the spectrum an exploitation play of a lot of investors, and on the other end of the spectrum, we do see an exploration focus. And, I think there’s everything in-between,” said Ruoff, speaking as part of a panel at the recently held Prospectus 2021 conference.
By exploitation, Ruoff is alluding to predictable outcomes, known structures and things of this nature that have ultimately proven their track record, such as the catastrophe bond sub-sector.
“We have seen interest and we will continue to see a lot of investors, let’s say, staying within something they know, they’ve understood, and that has worked,” he explained.
On the other side of the spectrum, continued Ruoff, sits the more exploratory play and this includes those investors that have returned to the space, and are now keen to investigate other areas of the marketplace.
“And, the exploratory play can go into broader ILS strategies, if they are structured well and show the lessons learned from the past three or four years. But, then they also go into the private equity sector, where we do see and we’ve spoken about quite some interest and money coming in.
“And, then, obviously to the extreme on the exploratory side, you have seed capital for InsurTechs, you have seed capital, or venture capital for ventures that are technology driven, or are, let’s say, new ventures in the sense of they are covering risk that’s not been covered before,” said Ruoff.
Of course, it’s very difficult to predict exactly where investor appetite will focus at 1/1 and into 2021, but as noted by Ruoff, “it’s about knowing your investor base and what to offer to that investor base so that they can really understand where they sit between exploitation and corrective predictability of outcome towards exploration, where you have really high possible returns, but also a potential risk of failure.”
“I think it comes down to what you call the alignment of interest, and the alignment of interest with the manager that’s the fiduciary of the money, or with the management team, or the capital providers and the management team when it comes to building new structures.
“To summarise, at the end of the day, what we see is rising interest for ILS structures that are predictable in outcome,” he added.
To watch every session on-demand please visit the Prospectus 2021 website.