Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

The next-generation of ILS is already in development


The insurance-linked securities (ILS) market has never stood still during its relatively young, approximately 25 year history. But it’s clear that the ILS industry is acutely focused on delivering more evolutionary change and progress at this time, with the next-generation of ILS risk transfer and investment opportunities already in development.

Artemis Live logoWe’ve just held our fifth ILS NYC event virtually and while we’re disappointed that we couldn’t be in New York to meet with friends, contacts and readers in person, we hope the quality of discussions we produced goes some way to making up for this.

The event has been a labour of love for us, given the significant time and effort put into ensuring the discussions are truly interesting and not just another reinsurance conference discussing renewals and rates.

Every one of the fourteen recordings we produced for the event brings something different, in terms of a view point, a forecast, or an insight into what the future may hold for the insurance-linked securities (ILS) market.

I’d like to personally thank everyone who spoke with me, for sharing their time, expertise and deep insights into the ILS market. I’d also like to thank our kind sponsors, whose support is highly valued.

The discussions I had with industry leaders ranged from the evolution of insurance-linked securities (ILS) structures and future development of ILS business practices, on both the risk transfer and investment sides of the asset class.

The industry seems primed for adding efficiency as well, with the next-generation of ILS allocation strategies also set to touch on origination as well, as ILS managers remain focused on delivering better products, both in terms of risk transfer and investments.

It’s clear there is room for further adaptation and development of existing structures, on both the risk transfer and investment side.

While it’s also clear that adoption of advanced technology is going to provide the ILS market with the ability to cover an increasingly broad range of risks.

Some of those risks aren’t even fully-insured yet, which means the ILS market is destined to become a capacity provider to entities and companies that to-date haven’t even tried to properly transfer their risks or hedge their exposure to emerging intangible and climate related risk classes.

On the establishment side, we’re going to see a wave of increased adoption of ILS structures and mechanisms for bringing third-party capital into the traditional reinsurance business, it seems.

A number of our speakers discussed this, with Swiss Re executives laying out exactly how the giant reinsurer’s thinking on ILS is developing and going to mean increasing engagement with capital market investors and use of ILS like structures for a wider range of risks.

The catastrophe bond, which was really the first widely adopted ILS structure, was not left out, seemingly destined to find a growing range of sponsors to adopt cat bonds as vehicles for securing risk transfer and insurance.

Even the World Bank sees the potential for its member countries to embrace ILS and catastrophe bonds for securing insurance against a growing range of exposures.

While environmental, social and governance (ESG) has become a topic of great importance in the ILS and wider reinsurance marketplace, it’s clear from our discussions that, on the one side, the industry has work to do in ensuring its investments meet allocators strict ESG standards, while on the other side the development of ESG friendly and impact positive risk transfer solutions is an equally large opportunity for the sector.

We couldn’t forget the pandemic, as an ongoing issue of note for both ILS funds and all others underwriting reinsurance or retrocession.

Our fifth ILS NYC event was brought to a close with an interview with high-profile start-up OTT Risk to learn more about its founders David Soloff and Chamath Palihapitiya’s ambitions and goals to build reinsurance capacity to fill business interruption and related protection gaps using advanced tech and the capital markets.

All of these learnings come at a time when ILS market participants and in particular ILS fund managers have been working hard to enhance the terms of contracts entered into, improve performance of their portfolios and deliver on promises, both to the cedent and investor side.

After the heavy years of catastrophe losses, the loss creep and trapped capital and now through the pandemic as well, the ILS market has responded to take learnings on-board and improve its offering to customers as a result.

With the development of next-generation ILS business models, structures and investments now well underway, it’s likely we’ll see a shift towards a renewed focus on acquisition of customers, on both sides, as well as integration of technology to make this as efficient as possible.

In addition to a renewed focus on how capital markets capacity and securitization can be harnessed to enhance the efficiency of traditional insurance and reinsurance business models, by becoming deeply embedded, as well as the efficiency of direct risk transfer itself for corporate, sovereign or municipality, and other large asset owners and entities who are buyers.

The future looks bright, but there’s a lot of work still to do. The next decade of ILS promises to be fascinating!

Watch every session of ILS NYC 2021 at the session links below:

Friday 5th Feb:

What’s next in industry loss ILS and what the industry should prioritise – Tom Johansmeyer, PCS.

The next decade of the ILS market – Niklaus Hilti, Credit Suisse Insurance Linked Strategies.

The role of the reinsurer in delivering next generation ILS investment opportunities – Judy Klugman and Ed Johnson, Swiss Re Capital Markets.

Monday 8th Feb:

The ESG and impact opportunity in ILS – Barney Schauble, Nephila Advisors.

A next generation insurance-linked securities allocation – Michael Stahel, LGT ILS Partners.

Speed, SPACs and Screens (accelerating change) – Michael Millette, Hudson Structured Capital Management.

Tuesday 9th Feb:

Spreading the Word of Alternative Capital Beyond CAT Risk – Panel discussion.

How ILS can assume a larger role in re/insurers capital stacks – Cory Anger and Liam Martens, GC Securities.

The future of ESG in ILS – Marcus Rivaldi, Twelve Capital.

Wednesday 10th Feb:

How the World Bank’s use of ILS structures may evolve – Michael Bennett, The World Bank Treasury.

What the ongoing pandemic means for the ILS and reinsurance market – Tom Johansmeyer, PCS.

The role of the capital markets (and ILS) in closing climate protection gaps – Rowan Douglas, Willis Towers Watson.

Thursday 11th Feb:

Enhancing ILS structures to promote future expansion – Steve Rooney, Ricky Spitzer and Colin Scagell – Mayer Brown.

The future of insurance? – Big tech, big data, big (ILS) capacity – David Soloff and Chamath Palihapitiya, OTT Risk.

Every session from ILS NYC is now available more broadly via our Artemis Live video channel and audio versions will also be shared via our podcast as well.

Please visit our sponsors page, as without the kind support they provide we could not bring these event broadcasts to you.

Please visit our sponsors page, as without the kind support they provide we could not bring these event broadcasts to you.

Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

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