Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Ten pre-Monte Carlo thoughts & some reading material


With the great and good of the reinsurance and insurance-linked securities (ILS) industry descending on Monte Carlo for the 63rd edition of the Reinsurance Rendez-Vous de Septembre event, we thought those travelling here may like some reading  material and thoughts on topics for discussion at the event.

list-check-topWe’re already on the ground at the event and testing the sentiment of the market through our initial discussions with participants today.

While much has changed over the last year across reinsurance and ILS markets, making loss activity and how it has been dealt with one guaranteed topic of conversation, some of the market’s evolutionary trends remain the same as in previous years and deserve our continued attention.

  1. Alternative capital and ILS are here to stay:
    The CEO of Swiss Re Christian Mumenthaler acknowledged the fact the capital markets are here to stay in reinsurance three years ago in Monte Carlo and even after the market faced its most severe losses, ILS is now widely expected to remain prevalent and resume growth.
  2. Technology will drive an ever-deeper convergence of risk and capital:
    The market hasn’t even scratched the surface of what will be possible in risk transfer and connecting risk and capital using technology. We still expect the coming together of insurtech and insurance-linked securities (ILS) will accelerate the transport of risk to capital.
  3. ILS is becoming increasingly embedded in traditional reinsurance business models:
    ILS and direct capital markets funding structures are increasingly the norm and thought to enhance reinsurer competitiveness, while some of the largest reinsurance firms are taking steps to ever more closely integrate ILS within their business models (SCOR, Swiss Re and AXA XL, to pick on a few very recent developments).
  4. Narrowing the protection gap is about more than just capacity:
    It’s increasingly clear that the entire insurance, reinsurance and ILS market needs to re-assess its product set, to make it increasingly responsive and relevant, while the rate of closure of the protection gap could be much more significant under a re-imagined risk market paradigm and incumbents may need to disrupt themselves if they want to make radical progress here. For now, the protection gap remains the industry’s “terrible failure,” (although signs of progress are emerging) and alternative capital is definitely needed to assist in its closing, given the scale of the issue.
  5. Investors aren’t even close to satisfying their appetite for ILS and insurance risk-linked returns:
    The vast pool of institutional investor capital dwarfs reinsurance and its appetite is not yet being satisfied, leaving opportunities for those who can find new and more efficient or effective ways to connect it with insurance risk.
  6. The catastrophe bond is still king (for some):
    While ILS encompasses a growing range of forms, funds and vehicles, the catastrophe bond itself continues to offer certain large investors great satisfaction, given its securitized features, secondary liquidity, value in portfolio construction terms, ease of access and robust terms.
  7. But collateralized reinsurance remains the future for now (until its next iteration):
    Collateralized reinsurance growth is likely to continue, but the ongoing evolution of it could make it even easier to access and similar to traditional reinsurance, meaning its future form may be very different to what we see today.
  8. If you’re not delivering demonstrable value (to clients, cedants or investors) perhaps your an unnecessary link in the chain:
    Survival isn’t guaranteed for anyone, as the insurance and reinsurance market evolve and become more efficient, but adding value is the best way to ensure relevance and staying power.
  9. The transfer of risk to capital remains too expensive:
    The need for capital efficiency is clear and as access to cheaper capital and inventive ways to source risk are seen as key to the evolution of reinsurance, the ongoing drive for efficiency within the market can stimulate the expansion of the insurance-linked securities.
  10. This industry is full of experts, put them to good use:
    For all its issues, problems, inefficiencies and challenges, the insurance, reinsurance, ILS and wider risk transfer marketplace is full of expertise and also an awareness of the benefits its products deliver. If there’s one topic we would like to hear discussed more often at events like the RVS, it’s driving home the important role of insurance in society and the fact it can do so much more.

We hope you enjoy our look at a few key talking points for the reinsurance and insurance-linked securities (ILS) industry on the eve of the 63rd Monte Carlo Reinsurance Rendezvous, as well as a trip through some select articles from over the years

The Artemis (and Reinsurance News) teams will be on the ground at the event.

So please come and say hello, introduce yourselves and let’s discuss this fascinating marketplace and how it will continue evolving into the future.

We wish you a successful Rendezvous and look forward to seeing some of you there! Safe travels.

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