The 2023 opportunity looks more attractive for ILS: Convergence

On the final day of the 2022 Convergence event in Bermuda, experts from across the insurance-linked securities (ILS) sector explained that, despite the challenges of recent years, there are opportunities out there.

To end this year’s Convergence, Jan-Hendrik Hein, Investor Relations & Business Development Lead at Hiscox ILS, moderated a panel featuring experts and executives from across the space.

The insightful and thought-provoking discussion covered a range of topics with a focus on some of the challenges of recent years, and also the opportunities for the space in a disrupted marketplace.

“I think this is a market which has a lot of opportunities, in the right structure and at the right price,” said Philipp Kusche, Partner and Global Head of ILS and Capital Solutions at TigerRisk.

“We were looking at $20-30 billion of shortfalls before Ian, and significantly more after Ian. So, at least from our side, I think it’s unlikely that any capital inflows will even partially make up for some of the capacity needed, which ultimately will create opportunities for investors who understand the space and are willing to dive into it in more detail,” he continued.

Todor Todorov, Vice President, Business Development & Investor Relations, Elementum Advisors, expanded on this, stating that in spite of recent difficulties, the fundamental thesis of the asset class still holds.

“This is an uncorrelated, diversifying return stream. And if anything, actually, the last 12 months in traditional financial markets, and what we’ve seen in equity markets, fixed income, etc, etc, has reminded us that a bit of diversification in a portfolio is probably a good thing. This asset class can offer that,” said Todorov.

Adding, “With regards to the forward looking potential, a disruptive market, talks of shortfall and generally demand exceeding supply of risk capital, is the type of environment where we can solve some of the issues that we’ve seen over the last six, seven years. Now is the time really to address those issues and make sure that the asset class is resilient and stays resilient for the future,” he continued

According to Eveline Takken-Somers, Senior Investment Manager, PGGM, “The 2023 opportunity looks definitely more attractive than we have seen over the last couple of years.”

However, she continued, PGGM will also be keeping in mind that going forward it “will be more selective and if rates start to deteriorate, we will likely decrease as well. Because we believe that we’re not, per se, entering this great hard market, I think we’re entering a market where actually rates are adequate for the risk that we’re taking. So, going forward it should last longer and become a sustainable part of it.”