Increasing number of ILS formations seen, particularly in casualty: Damian Sealy, PWC Bermuda

There are an increasing number of insurance-linked securities (ILS) and collateralized reinsurance formations in Bermuda that have a focus on areas of the property and casualty (P&C) market outside of natural catastrophe risks, Damian Sealy of PwC Bermuda explained in a recent video interview.

Our latest Artemis Live video interview is with Damian Sealy, a Director and the Actuarial Leader for Bermuda and PwC in the Caribbean.

Sealy leads the delivery of actuarial services for PwC Bermuda and the Caribbean’s audit and advisory engagements. During his 18 year actuarial career he has worked with most insurance entities, from captives, to large global property and catastrophe reinsurers, as well as collateralized reinsurance and ILS structures in Bermuda.

During our interview, Sealy pointed to the health of the ILS market and expanding use of alternative capital sources in lines of insurance business outside of the more typical property cat.

He explained that the ILS and collateralized reinsurance market is “actively growing” and that this is leading to an increasing number of engagements for actuarial work related to newly established structures.

“For my team specifically, we’re certainly seeing an increase in the number of new formations requesting our actuarial support, whether that’s directly providing advisory support, where we are independent of the new vehicle, or as the actuarial team member within the overall audit team,” Sealy said during the interview.

Going on to say that, “What I’ve seen recently are a number of structures, collateralized insurers and reinsurers, sidecars, where the underlying coverage relates to casualty business, and some also providing coverage across the market, in property cat, casualty, specialty.

“We, of course, focus our assistance in helping clients, or in the case of audit where the audit team is essentially my client, we’re trying to help them to understand the sensitivity and the variability of that result.”

Asked whether he believes casualty ILS and other P&C lines are a growth area, Sealy said, “I certainly do, especially as the industry and as the market, with the support of actuaries, continue to explore the impact that tail-risk and that longer-term variability can have, it can be positive, if understood.

“So I do think that this is a particular growth area, and I’m glad to see the market giving it consideration and expanding the support that it can lend to the industry.”

Later in the interview Sealy commented on ILS market growth prospects, saying, “At this stage, I don’t see any any signs of the growing usage of alternative capital structures abating.

“What is evident is, I think the improved efficiency in a lot of these structures has certainly been welcomed by the market at a time when it is possible to capitalise on and maximise investor returns during these hard market conditions.

Sealy also highlighted the need to consider how the rest of the hurricane season pans out in 2024 and whether global disaster losses create any losses for reinsurance and ILS, as well as what effect this could have.

But added, “Thankfully, the reinsurance industry is not showing a shortage of capacity at this time. It appears to be keeping pace with the industry’s demand and and importantly, its ability to respond in times of need.”