Link between casualty and capital markets has evolved from theory to practicality: Ecclesia Re

Thanks to the development of well-structured and innovative solutions, the market for casualty insurance-linked securities (ILS) is growing and reinsurance broker Ecclesia Re sees the link between casualty risk and the capital markets as now much more than just a theory.

Having published a white-paper on casualty ILS today for clients and partners, focused on delivery of capital beyond the cycle and providing innovative capital solutions to European insurers, the reinsurance broker highlighted that ILS and alternative capital are now a valuable complement for traditional ways to transfer liability risks in Europe.

“Our aim is to help European cedants navigate selectively available capacity with structures that meet today’s governance and transparency expectations,” explained Jens Ziser, Managing Director at Ecclesia Re. “This paper sets out practical pathways for pilot transactions and scalable platforms in the years ahead.”

In summary the paper explains that there are a range of solutions available through which cedents can transfer liability risk to capital market investors, or partner with alternative capital sources.

Ecclesia Re explains, “The casualty reinsurance market is entering a new phase. While traditional capacity for casualty risks has become more selective, capital market investors are actively seeking diversified, uncorrelated return opportunities.

“By transferring well-structured liability portfolios into capital market instruments, insurers and captives can unlock Solvency II capital relief, access additional capacity, and secure cost-efficient, long-term financing.

“Case studies such as structured quota shares and sidecar solutions illustrate that the link between casualty risks and capital markets has evolved from theory to practical application.”

It’s further evidence of the growing wave of interest in leveraging insurance-linked securities (ILS) techniques and market infrastructure to transfer and support casualty risks or portfolios of longer-tailed liabilities.

It’s becoming a dynamic market segment and one that has enormous growth potential, as it moves beyond the niche specialists that have dominated the casualty ILS space in its nascent phase and becomes an increasingly practical and attractive option for both cedents and investors.