More funds will seek rated paper
Despite some of the recent challenges
they have faced, insurance-linked
securities (ILS) investors are not
going anywhere soon, and they will form
increasingly deep and complex relationships
with the industry, Mike Van Slooten, head of
market analysis at Aon, told Monte Carlo Today.
He said that many investors had been hit
by a catalogue of bad news in recent years
including heavy cat losses, trapped capital
and loss creep on cat events. Some have
questioned the credibility of risk models and
many are asking pertinent questions about
But the non-correlated nature of the asset
class means that investors remain drawn to it
despite some of these challenges, Van Slooten
“Yes, a lot of investors have paused for
thought but there is still a lot of capital on the
sidelines that could move in quickly,” he said.
Much could depend on the rest of the
year’s hurricane season, he added.
“Hurricane Dorian was a near-miss for
the industry. If investors end up with three
years’ worth of losses or more trapped capital,
that would make their response pretty
interesting,” he said.
“If, on the other hand, we get nothing now
until year end and trapped capital is released,
we could see their appetite increase and move
into even more areas.”
Van Slooten noted that a number of
ILS funds are now pondering the move to
creating a rated balance sheet reinsurer. He
said this could work in a number of ways,
but could effectively simply operate as a way
of transferring the risk on to capital markets
investors via a 100 percent quota share
“For the buyer, it offers them something
they are familiar with in the form of a rated
counterparty; what happens behind the
scenes is irrelevant to them but if another risk
transfer is taking place that makes it more
efficient, that can work for both parties,” he
“It is a way of achieving the best of both
worlds—maximum access to business at a low
cost of capital.” l
Commercial lines transformation projects on the rise
There is currently a rise in the number
of commercial lines transformation
projects, Tammy Richardson, managing
director, UK & Ireland, insurance consulting
and technology, Willis Towers Watson, told
Monte Carlo Today.
“We are seeing a lot of commercial lines
transformation projects, particularly with
the company market, Lloyd’s and the London
Market,” Richardson said.
“In the UK, personal lines has been a very
competitive market and companies have
invested in the past to make sure they are not
losing ground, but now that has moved on to
“It’s been underinvested in the past and
we’re seeing lots of effort by companies
to make it more analytical, using data,
providing underwriters with dashboards and
workbenches to make better decisions.
“That comes with improved efficiency on
processing, and that’s where our technology
comes into play.”
She added that the need to be more efficient
Mike Van Slooten
is generally a strong theme with companies.
“Technology is one way to do be more
efficient, but embedding technology to
improve efficiency also improves governance—
you get fewer personal touchpoints of data
and processes when you have a system that
will do it,” she explained.
Another topical issue highlighted by
Richardson as a concern for clients was the
impact of IFRS 17—it is leading to an increase
in outsourcing of the actuarial function.
“These accounting changes are affecting
a lot of our clients,” she said. “We are seeing
more outsourcing because with the regulatory
burden on some insurance companies they
are looking at what can they outsource to
companies like us.
“That enables companies to focus on what
they are good at.”
Discussing the importance of inclusion
and diversity in the re/insurance industry,
she highlighted the need for recruitment
processes that encourage a diverse range of
applicants, and contracts that make flexible
“We have people who are remote workers
and part-time workers, for example,” she said.
“Everyone should be given the opportunity
to be successful in the industry—we like to see
more young people being attracted and to
help them develop.
“It’s important to look at people as
individuals, and how you can help individuals
become what they aspire to be.” l
There is still
a lot of capital on the
sidelines that could
move in quickly.
Monte Carlo Today Day 4 Wednesday September 11 2019