(Re)Connect 2020 - ILS Roundtable

Click here to download the (Re)Connect Trading Risk ILS Roundtable supplement

Covid-19 may have been the biggest talking point in the (re)insurance markets this year but arguably as fears around the scale of the loss recede, the pandemic is being overtaken by several other factors – ILS market dynamics amongst them.

Reinsurers are pushing for more rate in the 2021 renewals to compensate for low returns and rising social inflation and fears over casualty loss deterioration.

But the ILS market pullback over the past year is another major driver of the improving market, as net investor outflows have pared back total capacity.

Retro availability is also a huge talking point for carriers in the run-up to the renewal, due to the potential threat for trapping capital over Covid-19.

This may skew more of the retro market back towards rated providers in the near-term, but despite the challenges that have emerged in the past few years, our panel provided a balanced view on how the ILS market may evolve in the
future.

We heard the view from Axis, a long-term user of ILS capital, that if buyers want to review how long they can hold collateral, for example, then it will come down to a matter of price and negotiation. With ILS providers offering multiple solutions these days – from in-house ratings to fronted paper to collateralised deals – they offer buyers the flexibility to suit their needs.

But cedants may need to be cautious on how much they are willing to give up in terms of moving away from standard buffer factors that protect their hedging programmes against suffering in the event of loss deterioration, as GC Securities warned.

Another theme was that there may be a continued acceleration in growth of the cat bond product – after years of collateralised reinsurance dominating the ILS market – as a result of investors giving a greater preference to liquidity and lower-risk structures following the recent string of catastrophe loss years.

The Monte Carlo Rendez-Vous is usually a time for the industry to gather and figure out the themes and talking points or new strategies that will be a theme of the run-up to the New Year.

By hosting roundtables such as these – in virtual format this year, with the cancellation of the physical Rendez-Vous – we hope to help further those discussions.

Over the next few pages, you’ll see some of the highlights of this Chatham House debate, presented in a variety of engaging formats.

Enjoy the read.

Fiona Robertson
Managing Editor,
Trading Risk

Click here to download the (Re)Connect Trading Risk ILS Roundtable supplement

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