An Italian cat bond “would be snapped up”, says Tenax Capital’s Figna

Speaking to a local Italian daily newspaper, Massimo Figna, founder and CEO of hedge fund manager Tenax Capital, explained that with insurance penetration extremely low, Italy would benefit from the use of catastrophe bonds, which he believes investors would “snap up.”

Tenax Capital is a London-based investment manager that Figna founded and it offers a UCITS catastrophe bond strategy to its investor clients.

Leading Italian daily newspaper il Fatto Quotidiano spoke with Figna recently and asked him about his views on insurance penetration in the country, under the spectre of recent catastrophic flood and severe weather losses across the north.

Figna highlighted that Italian citizens are typically underinsured, with perhaps only up to 5% having coverage against catastrophic losses from earthquakes and floods.

Citizens often think that the state will step in after catastrophe events to allocate funds to recovery, but in general these are never sufficient to make people whole again following severe weather or disaster losses.

“To have economic efficiency, so to speak, to allocate less money, the State could sponsor reinsurance coverage, for example through a cat bond,” Figna explained.

Saying that, ” A cat bond on Italian risk would contribute to filling this coverage gap and spreading a culture of prevention, in which we have always lagged behind.”

Asked whether he would invest in an Italian cat bond he said, “I would invest and anyone else, probably,”

He explained that with the catastrophe bond market largely focused on US perils, investors are looking for diversifying opportunities.

“This is why I am convinced that if there were a cat bond on Italy risk it would be snapped up,” he said.

He went on to explain the benefits of encouraging a culture of risk protection and risk transfer, from the government down.

“If the Italian state sponsored a cat bond, it would not only increase the ability to provide immediate post-event aid to the population, without burdening the treasury, but it would indirectly accustom citizens to dealing with the issue of protecting their assets, thus favoring a necessary cultural progress in a context of great uncertainty and increasingly recurring natural risks,” Figna told the newspaper.

Asked about whether insurance should be compulsory in Italy, he noted that this could drive insurers to use instruments like catastrophe bonds more themselves.

For the same reason that now the State should consider it, as it acts as the insurer of last resort and “should mitigate the risk, for example, by issuing the bond.”