Robust platforms, a major step towards success for ILS fund managers: Synpulse

Joel Smith, Associate Partner at global management firm, Synpulse, has stated that success for insurance-linked securities (ILS) fund managers will be driven by “delivering predictable returns and insights, fostering transparency for investors, and administering a robust operating platform to execute their investment strategies.”

Writing in Artemis’s Q2 2022 catastrophe bond & ILS market report, he notes that while each of these three pillars play such a key role to achieving success, a robust platform is often underserved.

Today, many ILS fund managers find themselves either at, or near, an inflection point. Having weathered the recent loss years, they have managed to stabilize their business and are in position to grow. However, Smith highlights that this growth opportunity is contingent on the ability to effectively and efficiently scale and manage operations.

“Success translates to more capital which translates to more transactions to be processed,” Smith explained in the Artemis report.

“An ILS fund manager can navigate this increased complexity and throughput with five key aspects critical to winning: digitized workflow, systems for sourcing and management of risks and capital, robust ecosystem partnerships, quality data management, and superior talent.”

Furthermore, Smith explains that systems-based workflow is central to the fit-for-future operating platform. He addresses that technology solutions are available today which can accommodate the variations and nuances in handling ILS transactions.

“At the same time they can also automate repeatable, volume-based steps, including post-trade processing & settlement, statement of accounts and claims processing, as well fund performance calculations, therefore enabling scale and optimally positioning the manager’s most expensive resource, its talents, to handle any complex cases and exceptions,” he explains.

In addition, digitizing workflow reduces operational risk and improves efficiency, making it less painful to backfill when someone inevitably leaves the organization.

At the same time, a fit-for-future ILS fund manager creates its own view of risk and prices it accordingly. However, when bound, they transform the risk into investments in accordance with investor expectations.

In the Artemis report, Smith stated that in due course, it deploys a system-based approach for managing both the risk and the capital throughout the lifecycle, which ultimately achieves timely views on cash flow, as well as generating insights for investors and addressing all regulatory requirements.

Smith continues, by addressing how widely leveraged in ILS today are partnerships with fronters, modelers and third-party administrators.

“The relevance of partners will only increase in the future,” he said. “As the manager drives to focus intently on its core capabilities—innovating, delivering, and managing investment solutions—it will look to collaborators to support its operations.

“This is then enabled by a shift away from documents that are shared through emails, and towards API-driven realtime communication and structured data exchange. A fit-for- future manager embeds collaborators directly into its operations, providing a seamless experience as an extension of the organization.”

Lastly, Smith explains that talent acquisition and retention is key and is often, rightly emphasized as key to future proof an organization.

“On top of that, fit-for-future managers look to partner collaborators to provide key insights and perspectives on topics such as emerging technologies and new alternative data sources that can then be leveraged back into the organization.”