“Denominator effect” among the biggest ILS challenges: Chris Parry interview

The “denominator effect” and investor rebalancing across asset classes has driven some of the biggest challenges for the insurance-linked securities (ILS) market in recent months, Chris Parry, Global Head of Capital Partners at RenaissanceRe, told us in our latest Artemis Live interview.

Chris Parry leads the third-party capital, insurance-linked securities (ILS) and joint-venture businesses at the global reinsurance company and joined us recently to speak about the state of the ILS market, investor trends he is seeing, his outlook for the rest of this year, and the strategic priorities for the RenaissanceRe Capital Partners business.

Speaking about the current state of play in ILS and third-party reinsurance capital, Parry said the market has faced its share of challenges of late.

Parry explained, “This is the fifth or sixth year in a row where we’ve had a big event, or a series of events, that has impacted the market close to 1/1, which is obviously our typical capital raising period in the year.

“I think, from our perspective, no different from others in the market, we did face some significant headwinds, it was tough. There were there various themes that came out and again, probably consistent with what others were seeing in the market, I think one of the biggest challenges for us was really having to deal with the denominator effect, you know, where debt and equity and other asset classes sold off during the course of ’22 and really many of our investors were sort of overweight, ILS, and reinsurance.

“So one of the big challenges was to convince them and their investment committees to continue to trade forward, and even in some cases increase their allocation, which was very, very difficult.”

However, at RenaissanceRe the Capital Partners business has been able to utilise its multiple balance-sheet and ILS structure platform to provide optionality to investors, which has helped the company continue to raise third-party reinsurance capital for these ventures.

Parry continued, “There have been some bright spots for us, though, I mean we did raise a fairly meaningful amount of capital in DaVinci, which is our rated offering.

“Investors are still gravitating towards the most efficient access point and DaVinci being rated and some of the other benefits that DaVinci has, including asset leverage and financial leverage, is something investors have really gravitated towards.

“So that that was a bright spot for us. We’re very, very fortunate and privileged to be able to bring capital into the market. It was a tough market, but we navigated it relatively well.”

The full video interview is embedded below and can also be viewed in full, along with previous Artemis Live video interviews, over on our YouTube channel.

You can also listen in audio to all of our interviews by subscribing to the Artemis Live podcast here.

All of our Artemis Live video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed directly from our YouTube Channel.

You can also listen in audio to these interviews by subscribing to the Artemis Live podcast here.

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