ILS Asia 2023: Education still critical in relatively untapped region

Yesterday’s Artemis ILS Asia 2023 conference marked our first in-person return to Singapore and the Asian region since 2019 and while there are marked differences in the conversation surrounding insurance-linked securities (ILS) and the use of reinsurance capital, it is clear the region remains relatively untapped, on both an investment and risk basis.

It has been a wonderful experience to return to Singapore, a city we have built strong connections with over the years since our first ILS Asia conference there in 2016.

Our whole reason for taking Artemis’ first ever conference to Singapore that year was, that in order to foster ILS activity, the region needed to become more closely connected with the insurance-linked securities (ILS) market’s participants, while education was clearly lacking on both the use of ILS as risk transfer tool and ILS as an asset class.

Both have clearly progressed over time, as evidenced by Singapore’s success in attracting ILS deals to locate there. But education remains critical and that goes for most participants in the risk transfer chain, as well as on the investor side.

The topic of education came up in the very first sessions of our full-day ILS Asia 2023 conference at the Suntec Convention Centre yesterday.

In fact, the topic of education on ILS and the need for more of it was raised in almost all of our panels, fireside chats and keynote speeches as the day progressed.

Speakers discussing the development of the ILS investor base in the Asia Pacific region all called for the need to educate better and more.

Our panel session that had a corporate risk management theme, saw participants stating that they lacked the clear understanding of how ILS transactions could fit into their enterprise risk management programs and insurance towers.

The risk managers participating both cited hurdles that need to be overcome, if these very large insurance buyers in the region are to turn to the capital markets in greater volume.

Meanwhile, our panel on public sector and sovereign risk transfer also highlighted the need for governments and public sector bodies to be better educated on the need for risk transfer, as well as for how to access insurance and reinsurance capital from the ILS market.

Perhaps most telling was the fact the more technical a discussion became, on the fundamentals of ILS, the more questions it tended to elicit from the audience, in Q&A sessions or during the breaks.

As the day progressed it also became clear that the ILS market is only scratching the surface of what the Asia Pacific market’s potential.

While we saw presentations detailing how issuance of catastrophe bonds covering Asian perils has picked up over the last decade and Singapore and Hong Kong’s ILS regulatory regimes are now both in place and being utilised, on the risk side there is still both work to do, as well as a need for risk pricing to meet ILS investor and ILS manager hurdles.

Asia Pacific has an abundance of natural catastrophe and severe weather risk, but it remains largely uncovered by insurance and reinsurance, meaning ILS market participation is impossible there.

Where risk is covered by insurance markets, it is often largely ceded to the traditional reinsurance market and ILS can find it unappealing at the often low-pricing seen, as major global players leverage the diversification benefits to soak up exposures in Asia Pacific.

Where risk is more accessible to ILS markets already, there remains a need for education of ceding companies, as well as of local broking teams, to ensure the capital market possibility is at least considered.

But risk is abundant and gradually becoming more insured, while economic growth is telling a compelling story of increasingly higher values exposed, which ultimately will need more insurance.

Hence, on the risk side, Asia Pacific does remain relatively untapped by ILS markets, with significant future potential for greater use of efficient reinsurance capacity from the capital markets to help in narrowing these evident protection gaps.

On the investor side, the story is one of a region still relatively untapped as well.

Our 180 attendees to the ILS Asia 2023 conference heard of Singapore’s 1,000 plus family offices, one relatively untapped source of potential future capital.

Speakers also discussed the challenges in tapping some sovereign wealth and pension related assets in the region, while we also heard that some large investors remain in a wait-and-see pattern after the last six years of sometimes challenging ILS market performance for the collateralized reinsurance and retrocession products.

Given the higher returns now possible from investments into catastrophe bonds and other insurance-linked strategies, the market’s product-set for investors is getting more attention, that was clear from some of the managers attending that had been visiting clients and prospects in the region.

But the trillions of dollars of institutional and high-net worth capital in Asia Pacific is still relatively untapped, while the need for education to help investors understand the benefits of an allocation to ILS, or at least what the ILS market even is, remains just as clear today as it did back in 2016 when we held our first Singapore conference.

We’ll bring you more coverage from the ILS Asia 2023 conference over the coming weeks and video will also be made available in due course.

Also read: More ILS structuring & deal capabilities needed in Asia as MAS streamlines regime: ILS Asia 2023.

Thank you to everyone who joined us and to all of our speakers, we hope you enjoyed the event. To our valued sponsors of ILS Asia 2023, thank you for your support and participation in the day!

Stay tuned for details of ILS Asia 2024 in due course.

Artemis London 2023 will be held on September 5th. Register here to attend.

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