ILS hugely important, evolving in a positive sense: Gianfranco Lot, Swiss Re

Gianfranco Lot, Chief Underwriting Officer (CUO) of P&C Reinsurance at Swiss Re, has highlighted the importance of the insurance-linked securities (ILS) market in helping to close the protection gap, noting that the sector is evolving in a positive manner.

Speaking recently during reinsurance giant Swiss Re’s 2023 Media Dialogue, Lot commented on the role of the ILS market when discussing the natural catastrophe line of business.

He explained how the company “engages heavily” and is both a “founder and pioneer” in the ILS space, an area which allows the reinsurer to access a wider base of capital.

“We actually need all that capital to close that protection gap”, said Lot. “So that’s a hugely important and really evolving in a positive sense area of the business.”

He went on to explain that Swiss Re engages in ILS for its clients and for its own purposes, as well as for governments that are looking to transfer some of their insurance risks.

As the Artemis Deal Directory shows, Swiss Re is a sponsor of catastrophe bonds but also works with others on the arranging and structuring side.

Expanding on the protection gap, Lot highlighted that in 2022, Swiss Re reported market-wide re/insured catastrophe losses of $125 billion, and global uninsured losses of $275 billion. This, said Lot, represents “an opportunity for us to create new products, to understand risk better and to be able to quantify that risk going forward even more accurately.”

While not new, parametric solutions continue to gain traction, and Lot noted the benefit of this type of coverage in providing rapid payout post event, as opposed to waiting for a loss adjuster to verify the loss.

“That’s an innovation that we promote and that is working, and that cash component is hugely beneficial for restoring businesses and restoring homes,” said Lot.

To conclude this part of the Media Dialogue, Lot offered some insights into Swiss Re’s position on the nat cat side of the business, where it has a 10% market share overall as a reinsurer.

“We’re present in all continents and in all major markets, and that allows us to be that diversified and to the benefit of our clients who ultimately enjoy that diversification through lower cost of capital, and also on huge capacities that we can bring to the table,” he said.