In working with third-party capital investors, Vantage Risk Ltd., the almost two year’s old Bermuda headquartered insurance and reinsurance company, sees it as important to help mitigate challenges investors have faced with traditional ILS products.
Vantage launched with a focus on third-party, or alternative capital, with senior leaders joining the firm that have significant expertise in insurance-linked securities (ILS) and the reinsurance capital markets.
Speaking with Artemis around the 2022 Monte Carlo Rendezvous event, Chris McKeown, Chief Executive, Reinsurance, ILS, and Innovation at Vantage discussed the firm’s approach to third-party capital and ILS, as well as how it sees the current opportunity set.
McKeown explained, “From Day 1 at Vantage, we have thought about the role “alternative” capital, or as I like to call it, partnership capital, can play in our journey.
“We don’t see ourselves strictly as a source of risk to third party capital. We wish to build a partnership capital model that provides transparency to third party investors, opportunities to participate alongside Vantage in portfolios where we see opportunity, and where we see more opportunity than our own prudent risk management will allow us to take on our own balance sheet.”
Right now, McKeown says that Vantage sees opportunities to continue building out its business, with partnership capital a supportive feature of the business model.
“The market is arguably tightening further. The industry saw some July property catastrophe programs going partially unplaced. There’s no indication that fundamentals will change by January,” he explained.
Adding that, “Necessity being the mother of invention, we’re excited by the opportunity to be responsive to clients’ increased capacity needs.
“We have the underwriting expertise and relationships to address what looks to be a challenging market and are building out the analytical platforms to best assure we achieve our pricing and return metrics on our portfolio.”
McKeown also noted that being a still relatively young re/insurer, Vantage perhaps has an advantage in the current market environment.
“Indulge me in a plug for new capital, namely Vantage,” he said. “For those with long tail or inadequate claims reserves, gains from rising interest rates will always lag. Not so for the new and nimble.
“Vantage started with small lines to build a sustainable, long-term business. That’s kept us smart and agile, growing subject to our risk tolerances. As a further barometer of conditions, we continue to see more business than we can accommodate within our thoughtful underwriting process.”
All of which suggests opportunities for those investor partners providing capital through Vantage’s ILS structure that it established soon after the company launched.
We reported at the time that Vantage had established its first insurance-linked securities (ILS) vehicle in Bermuda back at the start of 2021, soon after its launch, a collateralized insurer class company named AdVantage Retro I Ltd.
McKeown commented on this, saying, “One of the first things we did when we started Vantage was to also form AdVantage, in response to investor appetite to partner with us as we grow our business.”
He stressed the need for ILS structures to meet investor needs, saying that Vantage has worked to help mitigate some of the issues ILS investors have faced through typical collateralised reinsurance structures.
McKeown explained, “This vehicle is adaptable to multiple strategies and approaches to the market, and in partnership with Vantage, we will seek to address some of the challenges for investors like tail risk and trapped collateral.”
Finally, we asked McKeown for his vision of how a re/insurer like Vantage Risk can navigate evolving market and global dynamics, while making best use of the capital available to it.
“Collectively, we’d do well to continue to find ways of bringing more capital (and more efficient capital) into our industry to improve our relevance in a rapidly changing risk landscape, whether due to demographics, inflation, or climatology,” he advised.