More ILS funds mull rated paper
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Monte Carlo Today Day 1 2019
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means you’ll have a better one.
More insurance-linked securities
(ILS) funds are exploring the
possibility of forming rated
reinsurers to give them more flexibility to
offer investors a greater variety of investment
options, said John Warwick, managing
director and partner at ILS Capital.
The Bermuda ILS manager has openly
discussed that it is exploring the possibility
with the Bermuda regulator.
“The model of a balance sheet reinsurer
does offer more flexibility and avoids pitfalls
such as trapped capital,” Warwick said.
“For this reason, many other funds are now
looking at this possibility.”
He said that this would also help overcome
another perennial problem that funds face:
having capital at their disposal that they
cannot use. He said that last year’s renewals
were very late, and a number of fund managers
were left with unused funds that it was then
too late to deploy elsewhere.
capital would need to be held and reducing
the amount that would need to be kept.
“The problem on many deals has been that
the syndicate managing agent has insisted on
keeping 100 percent of the capital involved in
a deal, despite there being little likelihood it
would all be triggered,” Warwick said.
He added that ILS investors are seeking
diversity across types of risk—partly because of
disappointing rate increases on cat business,
and partly simply to diversify their portfolios.
“Some are considering investing in
Lloyd’s, but the market remains inflexible on
certain issues such as reporting and the levels
of capital that need to be held on gross lines
“We are hearing about big rate increases
on some lines such as in Florida—but we have
not seen them,” he said.
“Retro prices are likely to increase, but we
are not seeing the sorts of price hikes being
ILS Capital did not encounter this specific
problem since it writes deals throughout the
year, Warwick said. It has also been working
hard to resolve another problem for the
sector: trapped capital. It is looking to do
this by changing the way buffers work on
contracts—increasing the point at which