Risk recalibrated – but ILS investors need more than one year’s evidence: ILS NYC 2024

More than 400 attendees joined us in New York for our seventh conference in the city on Friday 9th February and while those at  ILS NYC 2024 heard of a determination to sustain the improved market environment from industry experts, end-investors said that more than one year of evidence is required.

Our ILS NYC 2024 conference saw a who’s who of the insurance-linked securities (ILS) market, as well as investors and other interested parties, come together for a full-day of thought-provoking discussion and valuable networking.

It was an excellent event, with the fully-engaged audience in the main conference room hearing industry experts debate some of the important ILS topics of the day, all under our theme of “Growing into the higher return environment.”

One of the messages that came through loud and clear from the conversations on stage, was that ILS and third-party reinsurance capital managers are determined to sustain the new reality of improved terms and higher attachment points, although being cognisant at the same time that the capital flows they expect will likely soften the pricing environment, at least to a degree.

But an equally strong message was sent by major institutional investors in the ILS sector.

That, while they do believe the ILS and reinsurance market environment has improved for the better, they are keen to see that sustained and demonstrated over the coming years, in the returns of catastrophe bond and ILS strategies.

During our first session of the day on investor sentiment and how it is evolving, our expert moderator Lorenzo Volpi, Deputy CEO and Managing Partner at specialist ILS investment manager Leadenhall Capital Partners LLP, asked the end-investors participating in his panel how sentiment is evolving at the investment committees of their organisations.

Eveline Takken-Somers, Senior Director, Lead Portfolio Manager – Insurance Portfolio at PGGM, which is still the largest single institutional investor in insurance-linked securities (ILS), explained that the market situation is greatly improved, which helps.

“I think we’re in a much better place than we were a couple of years ago, so that’s good. 2023 was a good year. 2022 was not great, but from a diversification perspective, which is one of the reasons why we invest in ILS, was still decent,” Takken-Somers responded.

Adding that, “Going forward, I think rates are great, retentions are really at the place they need to be. In addition to that, there were definitely lessons learned. So I think risk has kind of recalibrated over the last couple of years.

“So, from a risk adjusted perspective, I think we’re actually in a place where we would like to be.”

Volpi then directed the same question to Bernard Van der Stichele, Senior Portfolio Manager, ILS at HOOPP (the Healthcare of Ontario Pension Plan).

Van der Stichele said that his pension fund has been allocating to insurance-linked securities (ILS) for almost four years, but the education process continues for the investment committee and Board.

“We’ve had some difficult years, but we’ve now marked, finally, a very good year. But it’s not enough to really cement that conviction,” Van der Stichele continued to explain.

“I think it’s going to require, in the longer term. We can’t see rates and terms and conditions sort of plateauing and come down very quickly, we need to maintain discipline going forward.

“This is a long term play, we’re going to be in this market for many years, but we’ll scale up and down according to where pricing, and a whole host of factors are.

“So, one year doesn’t make a great asset class, we need a continued dynamic that is similar to 2023,” Van der Stichele said.

Takken-Somers later said during the same panel discussion, “As Bernard mentioned, one year of great results is not good enough to overcome the seven that came before.

“Overtime, this is not sustainable. There should be something to converge to that is reasonable for everyone, given the uncertainty in the world.

“If you ask which element I would prefer to stick to, that’s definitely structure. Going back to lowering retentions, given the amount of inflation we’ve seen, I don’t think we should go there.”

This message was echoed throughout the event, although brokers hinted that higher retentions are causing some pain for their ceding clients.

But, the capital side of the equations seems quite determined that their investments remain at these higher-up levels.

Of course, there is always room for innovative products to help in filling some of the gaps lower-down as well and the audience heard some discussions on this later in the day.

Investors in the audience that we spoke with during the event and the days surrounding it while in New York, also echoed this sentiment, that the alignment between risk capital provider and cedent seems stronger now, with an improved structure for sharing of risk.

But also, that there is still an appetite in some capital provider quarters to help those that require more protection, lower-down or for frequency loss coverage, but it must be at the right price and terms.

We’ll bring you more coverage from the event and video / audio of every session will be available in the coming weeks.

Artemis’ next conferences will be ILS Asia 2024 in Singapore this July and Artemis London 2024 in September!

Our conferences provide exposure in front of a highly relevant, senior and specialised group of attendees. Plus you’ll benefit from exposure in front of our entire global readership, which averages more than 60,000 individuals every month.

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Our conference sponsors for ILS NYC 2024 can be seen below. We thank them all for their valued support:

For all enquiries regarding sponsorship opportunities for future Artemis events please contact [email protected].