Global reinsurance firm Swiss Re is “very active” in creating new products for insurance-linked securities (ILS) investors, according to its CEO, who also sees the need for the capital markets to play a role in protecting against other risks that affect economies.
In a recent Artemis Live video interview, Christian Mumenthaler, the Chief Executive Officer (CEO) of Swiss Re, discussed ILS and alternative reinsurance capital activities at his company and also some of the future areas of opportunity he sees for the ILS market.
Mumenthaler told us that, on the ILS market, “I think it’s a fascinating field overall. We have a very good team, we’re very happy about our team, and we’ve invested quite a lot over the last few years.”
He went on to explain that the management of ILS capital has been expanding at Swiss Re and its Alternative Capital Partners team has been busy expanding the range of products it offers to investors in the space.
“They’ve expanded the universe of products they offer,” he said. “We continue to find new forms, because there’s different investor bases and they’re interested in different risk-return profiles and our team is very active in creating new product.”
It’s not just about the management fees for Swiss Re. The reinsurance firm is leveraging ILS capital and investor appetite to benefit its product offering to ceding clients as well.
Mumenthaler explained that, “I believe giving access to the capital market will be one of the valuable things we can also bring to our clients.”
He noted the still expansive protection gaps around some natural catastrophe perils, such as California earthquake risk and even US hurricanes.
“As hopefully the protection gap gets filled, the reinsurance industry cannot fulfil that role. So that’s always my argument why we need capital markets at-large to come in,” he told us during this interview.
But ILS capital is also relevant outside of natural catastrophe risks, Mumenthaler believes, with the COVID-19 pandemic demonstrating another area that the capital markets should be utilised within reinsurance.
“I can also think about other things, like pandemics which we just saw,” he explained.
Going on to say that, “If you think about event insurance, this is going to be very difficult and costly for reinsurers, because we’ll have to assume 100% correlation between every event we write, and this will make it very expensive. So maybe here also there is a place for capital markets.”
Which Mumenthaler sees as a way for reinsurance and capital markets to work together to the benefit of people everywhere.
“I definitely think there is a need, if you think from a holistic society point of view, there is a need for capital markets for some of these risks,” he said.
The full video interview with Christian Mumenthaler, CEO of Swiss Re, is embedded below.
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