Transparency & cost important, more risk will grow the pie: ILS NYC 2023

The insurance-linked securities (ILS) market is moving to a place where the non-cat component can expand, and if the market wants to grow over the long-term, more risk will need to come in, according to industry experts.

“If we do want to grow the market, we have to have more risk coming in, clearly,” said Kathleen Faries, CEO, Artex Capital Solutions, speaking on a panel session at Artemis’ annual ILS conference in New York City, held February 10th.

The day’s second panel, (Re)building confidence – in collateralised / private ILS markets, was moderated by Mark Gibson, Head of Products & Solutions ILS, Schroders Capital, who questioned panellists on the move beyond natural catastrophe risks.

“We’ve always had this conversation around how do we bring in casualty? How do we bring in specialty? How do we grow the market? And so really, honestly, just in the last 12 months, we’ve seen, again, sitting sort of in the middle of all this, that we’re now moving to a place where I think those things will start to happen, and we are seeing that happen. And I think that’s really important for the market,” said Faries.

Later in the session, a member of the audience expanded on this point, asking panellists what can be done throughout the insurance and reinsurance value chain to grow the pie while maintaining market discipline and delivering expected returns to investors.

“In the end, right, for the entire value chain to grow the pie, it’s really from the very, very beginning, from the insurance side,” said Chin Liu, MD, Director of ILS, Fixed Income Solutions, Responsible Investment Research, Amundi US.

“I think we know in the bond space the brokers motivated a bunch of corporate buyers to come to the market to buy some earthquake cover, right. I think there’s still significant insurance gaps, especially outside of the US, but even in the U.S. we know the California earthquake take-up rate is still very low. So, I think, unfortunately, that’s not something we can achieve overnight, we cannot achieve this year,” he continued.

However, if the market is able to show the benefit over the long-term, Liu feels that corporates and sovereigns, which require large limits, will come with more parametric transactions, for example.

“And, you know, that’s not something that one insurer or one reinsurer can take, that I think fits the capital markets appetite very well,” said Liu.

From an investor perspective, added Eveline Takken-Somers, Senior Director, Lead Portfolio Manager, Insurance Portfolio, PGGM, “transparency can still improve, and I think also costs are really important.”

“Ultimately, you look at your net returns, and if returns fall below a certain amount, then costs become relatively large. So, I think while growing the pie, hopefully, the asset class becomes more mainstream, and with that, the transparency increases, and cost reduces,” she added.

We’ll bring you more articles covering highlights from the event over the coming weeks and in time every ILS NYC 2023 session will be available in video and as a podcast episode as well, so do look out for that. Some initial photos of the day are available here.

Thank you to all of our speakers, sponsors and attendees for their support for Artemis ILS NYC 2023. We hope you enjoyed the day and we look forward to seeing you next year!