Litigation could follow storm claims
Losses from hurricanes Harvey and Irma
could take a long time to be resolved and
could hit lines of business the industry may not
have considered, according to John Warwick,
managing director and partner, ILS Capital
He said there will be high motor claims in the
aftermath of the storms, and mould claims could
also emerge after flooding. In addition, litigation
is possible in cases around the decision by the
authorities to open dams during the storms.
There is precedent for this in other countries.
In Australia litigation against the Queensland
government and the bodies that run the state’s
dams is ongoing as the result of a multimillion
dollar class action lawsuit brought over the way
two dams were managed during 2011 floods in
“There are a lot of moving parts and these
claims will take a long time to settle,” Warwick
said. “You could have property loss suddenly
also becoming a liability loss.”
Such scenarios could also mean collateral
is tied up for many years while claims are
resolved. But he believes investors will not be
deterred from reinvesting in the sector. “Many
have been waiting for a market-changing event;
they will reload,” he said.
He added that he does not expect the losses
necessarily to cause a hardening of rates but it
should certainly stop them softening.
ILS Capital Management is receiving
increasing interest from buyers more willing to
use its bespoke solutions to “plug gaps” in their
portfolio. Warwick said that while the company,
whose portfolio comprises one third marine
business, one third international property and
one third US property, does not write the big
cat lines many buyers need, it can assist on
specific issues with reinsurance coverage.
“We like to do things a little off piste and
assist buyers with specific problems,” he said.
“Everyone has different problems and they are
more open to exploring a collateralised solution
to address them.
“They are increasingly comfortable with
ILS or collateralised solutions as they don’t
have to worry about someone else’s balance
sheet, and so are their CFOs.”
Warwick added that ILS Capital
Management is enjoying steady growth and
intends to keep it that way, rather than take on
large amounts of investors’ money it must then
find a use for. He expects growth of between
15 and 20 percent in 2018, taking it to around
“We never wanted to front-load the business
with investment, meaning we had to write
“We want to grow at a manageable pace and
I think we are doing that,” he concluded. n
Irma an opportunity for ILS to prove its credentials
Losses from Hurricane Irma will not affect
investor interest in the insurance-linked
securities (ILS) market, according to Tom
Johansmeyer, assistant vice president at ISO
Verisks’ PCS strategy and development.
He told Monte Carlo Today that he felt
investors will not be spooked by payouts from
“ILS has enough history as a sector that
the fund managers have done a solid job of
informing and educating their end investors
so they do understand that ILS is not a
guarantee—you’re taking a risk,” he said.
He stressed that while there is some doubt
about how some investors will respond,
everything he has been hearing at the Monte
Carlo Rendez-Vous showed that investors did
understand the nature of the business. As a
result, he said, he did not think that capacity
would leave the market.
“The market will function as it should,”
Johansmeyer said. “If there are payouts from
ILS products, as everyone expects there will
be, you will see an ILS sector behaving like
the insurance sector. As an insurer, the best
thing you can do to prove your legitimacy is
to pay claims.
“The ILS sector, for the first time in a
while, has the opportunity to demonstrate the
payment commitment that is fundamental to
how insurance works. It’s the best proof of
what you do.”
Johansmeyer said investors will stick around
and, he thinks, cedants will still want to use ILS.
He added this was an opportunity for the
ILS sector to prove to cedants that investors
are committed to the space on an ongoing
basis, potentially also extending their reach
into this area and encouraging yet more ILS
capital to enter. n
14 | MONTE CARLO TODAY | DAY 4: Wednesday September 13 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com