The fifth in our series of articles featuring leading figures in insurance-linked securities (ILS) and reinsurance on the market as we move into 2015 features Luca Albertini, CEO of insurance linked securities (ILS) investment manager Leadenhall Capital Partners LLP.
We asked for participants thoughts and predictions for the ILS market, catastrophe bonds, collateralized reinsurance and reinsurance or catastrophe risks as an asset class as we move into 2015.
Luca Albertini is Chief Executive Officer of specialist insurance and reinsurance linked investments manager Leadenhall Capital Partners LLP, a joint venture established between its management and insurer and reinsurer Amlin Group.
Luca gave us some thoughts on what 2015 holds for the ILS and reinsurance markets.
His response follows in full below:
A question which is becoming topical in 2015 is about modelled versus unmodelled perils. There are two reasons for that:
- Some of the large programs are combining covers and therefore in some layers you do have exposures which model differently and some which cannot be modelled with vendor programs. If you participate in more than traditional ILS you may be more and more faced with the question of how much “pollution” is acceptable.
- If a manager has the skills to underwrite (as we believe he should play in our sector even if he has the convenience of vendor models) then he should use these skills to broaden his offering for investors. In some cases these alternatives can be in bespoke funds and in other cases in the general funds up to a certain extent. But if the risk is understood it does provide diversification not only of risk but also of sourcing and pricing negotiation.
On whether pricing will be the big topic in 2015, I do see signs of some bottoming out, and I believe that the discussion will turn to completeness of the relationship and terms and ease of trade.
This will generate pressure on players offering a narrow range of products (like for example only modelled perils) and even more to those offering only on certain layers of risk. My view is that the tiering of reinsurance players is occurring and with that the tiering of ILS players may already be underway with the risk of those being marginalised using pricing as a lever but not always successfully.
This is likely to create reallocation of capital to fewer more complete players, which of course supports the outlook for more M&A as well as termination of certain ventures. We have started seeing both of those occurring in Q4, and this may be the beginning of a more permanent trend.
This is on the other hand how capital markets capacity and traditional reinsurance can be seen as complementary in a venture like the one between Leadenhall and Amlin, when seen together we are both more relevant to the client than in isolation, as well as more complete in our offering.
Of course this does not play the same way in each and all cases and we both are very jealous of our relative underwriting independence, but the combination has supported both of our organisations in this challenging market and is encouraging us to continue along this process.
Our thanks to Luca Albertini for his time.
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Artemis’ Q4 2014 Catastrophe Bond & ILS Market Report – A busy finish to a record year for ILS
We’ve now published our Q4 2014 catastrophe bond & ILS market report.
This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the fourth-quarter of 2014, looking at the new risk capital issued and the composition of the cat bond & ILS transactions completed during Q4 2014. It also includes a brief review of the full-year 2014’s record issuance.