Soft market issues must be addressed: Luca Albertini, Leadenhall interview

The insurance-linked securities (ILS) market needs to address some of the issues that have emerged through the soft market period in reinsurance, in order to ensure it can hold onto its capital base, Luca Albertini, CEO of Leadenhall Capital Partners explained to us in a recent interview.

Our latest Artemis Live video interview welcomed Albertini back to discuss market conditions in insurance-linked securities (ILS) and catastrophe bonds, as the mid-year reinsurance renewals approach.

Albertini, CEO of Leadenhall Capital Partners LLP, the London headquartered specialist insurance linked securities (ILS) and reinsurance related investments manager, explained that there are multiple forces affecting the ILS and cat bond sector, but also that the legacy effects of softened terms and conditions are important to rectify.

On investor flows, Albertini noted that there has been “a lot to distract investors” and allocators, with multiple external factors from the situation in Ukraine, to inflation and rate rises having knock-on effects on the ILS market this year.

But these factors have also been one driver of recent catastrophe bond spread widening, on which Albertini said, “I hope it lasts for a while, because that is an embedded higher return for the investors.”

He noted a need for capacity, which has become evident through recent reinsurance renewals, saying, “The cat bond is delivering on what they were built for, which is to provide complementary capacity to the reinsurance industry when protection buyers need it most, and we are delivering.”

But most important at this time, is for the ILS market and its investment managers to focus on the sustainability of capital, as following certain challenges for the sector, “In order to keep the capital, we need to address some of the issues of the soft market and make sure that they don’t come back,” Albertini explained.