Capital’s view of ILS opportunities has rapidly evolved: McKeown, Vantage Risk

The evolution of investor’s and capital’s view of opportunities in the insurance-linked securities (ILS) space has been particularly rapid over the last couple of years and Chris McKeown of Vantage Risk believes collateralized reinsurance opportunities and new lines of business are increasingly of interest.

McKeown, the Chief Executive for Reinsurance, Partnership Capital, and Innovation at growth company Vantage Risk, spoke with us around the recent Monte Carlo Rendez-Vous event and explained that he feels while catastrophe bonds have been in focus, it is now collateralized reinsurance’s turn again.

“What I think is especially invigorating for the industry today is how capital’s view of ILS opportunities has rapidly evolved,” McKeown explained.

“Indulge me in plugging Vantage a moment. We’ve taken a “partnership” approach to working with our investors. We’re not creating packaged vehicles but working hand-in-glove to create risk portfolios that align with our investor’s goals. Our collateralized reinsurance framework is adaptable to multiple strategies and approaches to the market, and we have been actively working to address some of the challenges for investors like tail risk and trapped collateral,” he explained.

Going on to say that, “Syndicated portfolios are more susceptible to market cycles. Our partnership capital business is agnostic to the market; we’ve positioned ourselves to be of interest regardless of conditions. It is imperative to us as capacity providers to continually innovate products that are of value to the reinsurance buyers in order to justify our returns. If the market becomes cost competitive, we’ll strive to provide our counterparties with a greater ability to save across capital structures and counter what the syndicated market can provide.”

Which led McKeown to say to Artemis, “So, I think that collateralized reinsurance is where you’ll see interest from investors in 2025.

“You have seen the resurgence in interest in the investment class through cat bonds in 2023 and 2024 and some investors will again look to write more risk across the curve, and we see many of them become increasingly comfortable with less commoditized portfolios.”

Finally, McKeown highlighted that the ILS market does not stand-still and that investors are showing increasing interest in new risk classes and the investment opportunities they could present.

“I’m particularly excited to have investors now expressing interest in longer-tail liabilities that can be matched to asset strategies,” he said. “Vantage is well poised to seize that opportunity.”

During our discussion McKeown also explained why he feels we haven’t seen any new reinsurance start-ups of any note yet, despite the hard market pricing environment.

“For many investors, their appetite for that volatility has diminished while at the same time the world looks riskier. With the looming spectre of climate-induced losses, there’s less confidence that reinsurers will see good years to balance out the bad,” he explained. “That makes investors reticent. As an industry we need to continue to prove that we have the courage and conviction to grasp the proverbial nettle of today’s risks and deliver consistent results.”

In addition, the traditional market is now doing a better job of “harnessing ILS capital alongside their balance sheet capital,” which has muted the cat market opportunity for new entrants.

However, things are a bit different on the alternative capital side, with investor interest growing and widening, as ILS is seen as an efficient way to access the returns of the reinsurance market.

McKeown told us that, “It’s important to differentiate alternative capital investors. Returns have been strong in 2023 and there’s a bullish outlook. We’re seeing appetite for expanding into longer-tail lines, as I mentioned, and we’re advantageously positioned to meet that market interest.

“Structurally, there’s simply closer connectivity and alignment between investors and reinsurers in alternative capital structures. That builds trust and confidence. And it’s why we think Vantage’s partnership approach with our investors is key to our ongoing success in attracting capital for deployment.”

Read all of our interviews with ILS market and reinsurance sector professionals here.